Households across Australia have felt the financial squeeze of soaring interest rates and higher living costs over recent months. However, recent data suggests that the misery will worsen as inflation has rocketed to its highest level since 1990. Figures show that inflation in Australia has now reached 7.3%, with officials stating that this means interest rates will stay higher for longer.
Interest rate hikes have already put a lot of pressure on households and businesses across Australia, but with inflation now at such a high level, the Reserve Bank of Australia (RBA) is likely to continue hiking rates in the coming months. Inflation data released by the Australian Bureau of Statistics showed a 1.8% increase in the Consumer Price Index between July and September.
Earlier this month, the RBA increased the base rate by 0.25%, a drop from the previous four increases of 0.5% each. However, the reduction in the scale of the rate increases could be short-lived, given the latest inflation data.
Predictions over interest rate and inflation peaks
Economists have been making predictions about interest rates and inflation for the remainder of this year. Earlier this week, the federal budget predicted that the RBA’s cash rate would peak at 3.35% while inflation would hit 7.75%.
Like other central banks around the world, high inflation has forced the hand of the RBA in terms of interest rate hikes. The base rate has increased to 2.6% as the bank battles to bring inflation back down, but with the latest figures comes fresh concern over how high interest rates will have to go before there is any impact.
One of the country’s leading banks, ANZ, has already increased its projections of how high the base rate will go in order to tackle inflation. The bank’s prediction has risen by 0.25% from its previous one, with officials expecting the central bank to lift the cash rate to 3.85%.
Households under pressure
Huge numbers of households across the nation are already struggling. This is not only due to interest rate hikes resulting in soaring mortgage repayments but also the rocketing cost of living. Everything from energy prices to the cost of food and other essentials is taking its toll on household finances. If interest rates continue to climb, this could push many households over the financial edge.
The federal budget also made some worrying forecasts relating to energy prices, with projections that prices would increase by another 20% this year and then 30% next year.
The treasurer, Jim Chalmers, said: “I’m not going to pretend that we’re not worried about these electricity prices. Any responsible government facing these kinds of price hikes … needs to consider a broader suite of regulatory interventions than they might have considered in years gone by.”