Grim forecast for Aussie homeowners after sharp inflation rise

by Mina Martin27 Jan 2022

Interest rates could be hiked as early as May, economists have predicted following a sharp rise in inflation.

Australia’s consumer price index (CPI) rose to a bigger-than-expected 1.3% in the December quarter, pushed up by soaring petrol and housing construction costs. The figure is up from an 0.8% increase over the previous three-month period.

The latest increase means a total of 3.5% lift in the prices of everyday goods in Australia in 2021.

Following the shock inflation data, the Reserve Bank of Australia is expected to concede an interest rates rise is likely later this year, contrary to earlier prediction that rates would not lift until late 2023, news.com.au reported.

RBA governor Philip Lowe had previously talked down rate increases in 2022, saying it would be an “over-reaction” to inflation data. He had also suggested that early 2024 was the most likely time for rates to begin rising.

NAB economist Taylor Nungent told AFR, however, that the latest economic figures are “probably consistent with a rate hike in late 2022.”

Treasurer Josh Frydenberg said inflation in Australia remained half of what it was in the US and lower than in Germany, Canada, and Britain.

“Despite the global supply-chain disruptions Australia faces, and indeed so many other countries do around the world, the Australian economy is remarkably resilient,” Frydenberg told The Australian.