There will be at least two more rate rises

And here's what's going to drive them

There will be at least two more rate rises


By Jayden Fennell

The Reserve Bank of Australia says it will need to lift the official cash rate at least two more times to ensure the “scourge” of inflation is contained.

RBA governor Philip Lowe (pictured above) says further rate rises are needed to curb inflation and to help tackle the cost-of-living crisis.

In a speech on Thursday, two days after the RBA announced it was lifting the cash rate by 50 basis points to 2.35% – the highest level since 2015,  Lowe said the RBA board was committed to doing what was necessary to ensure that inflation returned to target over time.

It’s clear Lowe is concerned about the Australia public’s expectation that wages will rise as the cost of living rises and the effect this will have on inflation.

“If workers and businesses come to expect higher inflation, and wages growth and price-setting behaviour adjusts accordingly, the task of navigating that narrow path will be very difficult, if not impossible,” Lowe said

“A shift higher in inflation expectations will require higher interest rates. In time that would mean a sharper slowing of the economy. It is in our national interest that we avoid this.”

Lowe said wages growth had picked up but not nearly to the same extent as the United States.

“This is an important difference. While there are some areas where wages are rising very quickly in Australia, aggregate growth in wages has not responded materially to the higher inflation and is not inconsistent with inflation returning to target over time,” he said.

“It is important that this remains the case and that we avoid the cycle of higher inflation leading to higher wages growth and then higher inflation – a cycle like that would end in higher interest rates and a sharper slowing in the economy.”

Lowe described high inflation as a scourge.

“It damages our standard of living, creates additional uncertainty for households and businesses, erodes the value of people's savings and adds to inequality,” he said.

“Without price stability, it is not possible to achieve a sustained period of low unemployment. It is important, therefore, that this current surge in inflation is only temporary and that we once again return to the 2% to 3% range.

As of Friday afternoon, no major banks had passed the RBA’s interest rate onto its customers.

Fintech brokerage Finspo reported only a handful of lenders had announced they were passing on Tuesday’s rate hike to their customers.

 These include:



Effective Date

Auswide Bank


September 20, 2022



September 16, 2022



September 9, 2022

MyState Bank


September 19, 2022


In his speech, Lowe also responded to calls from some politicians and economists that he should resign, based on his statement last year that interest rates wouldn’t rise until 2024.

“I can assure you I have no plans to resign,” Lowe said.

“I did not promise interest rates would not go up until 2024. I know many people interpret my previous statements as saying that, but if you look back carefully, what we said was we thought the pandemic was going to have long-lasting effects on the economy. As it turned out, the pandemic improved ‘much faster than the advice we had and that others had’.”

Lowe said after a number of years in which inflation was below target, it was now considerably above target and was expected to go higher still in the short term.

“The extent of this turnaround in inflation has come as a surprise to many, including us,” he said.

“So, I would like to begin by exploring some of the lessons from this surprising burst in inflation.”

Lowe said 12 months ago CPI inflation in Australia had been below 2% and in underlying terms, was just 1.6%.

“CPI inflation has risen to 6.1% and underlying inflation is 4.9%. These are the highest rates in many years,” he said.

“This lift in inflation has come as a surprise. A year ago, the RBA was forecasting that inflation over 2022 would be just 1.75%. Now, we are expecting CPI inflation this year to be around 7.75%  – a very big change and a very large forecast miss.”

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