Australia is on the cusp of another interest rate increase, with experts forecasting a fourth hike before the end of September. Macquarie Bank predicts this move would elevate interest rates to their highest level in 15 years.
The Reserve Bank of Australia (RBA) is scheduled to hold its next board meeting on September 28 and 29. This prediction follows a similar forecast from NAB, which also anticipates a 25 basis point increase in the cash rate at the upcoming meeting.
Macquarie chief economist Ric Deverell stated that the RBA's primary focus remains on reducing inflation. He noted that with unemployment still significantly below pre-Covid levels, the RBA likely believes economic output is exceeding its potential, necessitating further action to bring inflation back within the target range.
RBA assistant governor Sarah Hunter recently warned that the board "may well have to raise interest rates to tackle" high inflation. Hunter emphasized that inflation is above the RBA's target of two to three percent and has been for some time. She indicated that if inflation proves stronger than anticipated, further rate hikes would be considered. Deputy governor Andrew Hauser echoed these sentiments, stating the RBA is committed to achieving its inflation target, even if it takes longer than other central banks, in an effort to preserve job gains made during the pandemic.
Hauser acknowledged public frustration with inflation, stating, "We are doing it in order to try to protect the jobs gains that happened during Covid." He also recognized the impact of inflation on individuals, particularly those on low incomes, and on businesses.
In July, both headline and trimmed mean inflation figures exceeded the RBA's projections, reaching 3.5 percent and 3.6 percent, respectively. The RBA aims to reach its inflation target band by the end of the following year.
Despite concerns about a deepening housing downturn due to high interest rates and upcoming tax changes, consumer sentiment regarding property prices remains divided. While economists predict a significant fall in nationwide house prices, only 32 percent of consumers expect a decline in the next 12 months, with 42 percent anticipating a rise.
HSBC chief economist Paul Bloxham forecasts a peak-to-trough fall of 13 percent in house prices, which would represent the largest housing price correction in modern history. Data from the Australian Bureau of Statistics indicates that property values decreased by $34.1 billion in the three months leading up to June. However, overall dwelling values remain high, with a significant increase since the beginning of 2025.
The potential increase would bring the RBA's cash rate to 4.6 percent, the highest it has been since November 2011. Consumer confidence has also been impacted, with mortgage holders experiencing a notable drop in confidence attributed to interest rate concerns.