PHOTO:  The Reserve Bank of Australia. SMH

The Reserve Bank of Australia has handed down its decision on whether to hike interest rates for a tenth consecutive month.

Australian mortgage holders have been hit with fresh financial pain following the Reserve Bank of Australia’s tenth consecutive cash rate hike.

The RBA on Tuesday handed down a 0.25 per cent increase to the official interest rate, bringing it to 3.6 per cent.

The March decision marks the tenth consecutive increase since the cash rate was at a pandemic-low 0.1 per cent.

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It is expected that lenders will pass on the increase, research director Sally Tindall said.

For the average owner-occupier with a $500,000 loan and 25 years remaining, this would see their repayments rise by $77.

Aussies with a loan of $750k would see a $116 increase to their repayments in March, while those with a $1 million loan would see an increase of $154 to their monthly repayments.

Tuesday’s 0.25 percentage point rate increase is the tenth consecutive hike, the highest consecutive number on record.


Outlook subdued

“Global inflation remains very high,” RBA governor Philip Lowe said in a statement following the announcement.

“In headline terms it is moderating, although services price inflation remains elevated in many economies.

“It will be some time before inflation is back to target rates.

“The outlook for the global economy remains subdued, with below average growth expected this year and next.”


Reducing inflation the priority

The monthly CPI indicator “suggests that inflation has peaked in Australia”, Lowe said, but the RBA is still seeking to return it to the central bank’s target of 2-3 per cent.

“The board’s priority is to return inflation to target,” he said.

“High inflation makes life difficult for people and damages the functioning of the economy.

“And if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment.

“The Board is seeking to return inflation to the 2–3 per cent target range while keeping the economy on an even keel, but the path to achieving a soft landing remains a narrow one.”


Hit to mortgage holders

Government Services Minister Bill Shorten said the rate hike would be difficult for mortgage holders.

“It’s going to be incredibly tough for families with mortgages. Quite frankly, I don’t know how a lot of them are doing it at the moment,” he told Sky News.

“I just want this cycle of pain to come to an end as soon as possible because at a certain point, it’s almost counterproductive.”

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The RBA adjusts the cash rate in an attempt to rein in inflation, which most recently was reported to be 7.4 per cent in the 12 months to January.

Though that’s a softening from the previous month’s rate of 8.4 per cent, it’s still a far cry from the central bank’s target of between two and three per cent.


Greens slam increase

The Greens slammed the increase, saying it is “a clear indication that the central bank is out of control and needs to be reined in”.

“The RBA’s response to a problem it doesn’t understand with a solution that doesn’t suit is a form of institutional madness,” Greens Economic Justice spokesperson Senator Nick McKim said.

“The RBA itself has found that inflation is being primarily driven by supply side shocks and corporate profiteering, and has admitted that there is very little that monetary policy can do to offset supply shocks.”

McKim said the interest rate rise was unnecessary given the RBA’s admission that the monthly CPI indicator suggests inflation has peaked.

“The government needs to wake up and take action to save renters and mortgage holders from being smashed by the RBA’s dogmatic interest rate rises. Instead of continuing to sit on its hands, the government should tax corporate super profits and the super wealthy then work with us to freeze rents, raise income support, and put dental and mental health into Medicare.

“The RBA’s actions are exacerbating inequality and causing hardship for those who can least afford it.”


Big four banks make dire predictions

The big four banks predict that Tuesday’s increase won’t be the last.

Commonwealth Bank anticipates the cash rate will hit 3.85 per cent in April before dropping by the end of the year.

Westpac, NAB and ANZ all expect the rate to peak at 4.1 per cent in May. Westpac expects the rate to drop to 2.35 per cent by December 2025, NAB expects it to drop to 3.1 per cent by May 2024 while ANZ forecasts a drop to 3.85 per cent by November 2024.