Australians will be hit with another four interest rate rises up until August to reach 4.1 per cent, a leading economist has warned.
And that’s not the only bad news, with the same expert forecasting the unemployment rate will rise for the first time in years.
Chief economist of Deutsche Bank, Phil O’Donaghoe, told The Daily Telegraphof his worrying predictions ahead of the RBA’s first meeting of the year where it is widely expected they will increase the cash rate again.
According to Mr O’Donaghoe, Australia’s central bank will hike up prices in February, March, May and August.
Currently, the cash rate sits at 3.1 per cent, a significant leap from its pandemic low of just 0.1 per cent.
If Mr O’Donaghoe is correct, then that means Australians will have to endure a massive increase in the next eight months.
A 4.1 per cent cash rate would sling Aussies with an extra $300 in monthly repayments for a $500,000 mortgage.
Originally Deutsche Bank’s forecast was much more optimistic but the latest inflation report scuppered any hope of interest rate rises starting to fizzle out for 2023.
Mr O’Donaghoe at first thought that the rate would only increase in February.
But after the latest consumer price index dropped last week, he’s had to drastically revise that estimate.
The Australian Bureau of Statistics found the annual rate of inflation was at 7.8 per cent, marking the highest yearly increase since 1990, and was higher than expected.
“After last week’s Consumer Price Index (CPI) and … also the fact that household spending looks like it’s been pretty resilient through Christmas and the start of the year,” Mr O’Donaghoe told the publication.
“Put those two things together and I thought 3.35 per cent isn’t going to be enough.”
The February meeting where the bank will make its first decision of the year is happening next week on Tuesday.
Mr O’Donaghoe had more bad news for Australians.
He has forecast that the unemployment rate is also set to rise to 4.5 per cent.
It’s currently sitting on 3.5 per cent and that level of increase could leave 100,000 Australians without a job.
Interest rates have been on the rise in Australia, and the rest of the developed world, as central banks try to curb inflation before it becomes out of control.
The RBA has increased interest rates every month since May last year, with the only brief reprieve being in January, when they did not hold a monthly meeting.
In a December statement, RBA Governor Philip Lowe indicated more rate rise were on the way, saying that the RBA “expects to increase interest rates further over the period ahead but it is not on a preset course”.
Economists have warned that the world is on the precipice of a global recession.
AMP Chief Economist Shane Oliver previously predicted that September would be a bloodbath for homeowners, as it would be when house prices would bottom out in response to the interest rate hikes, leaving Australians with more debts to pay off than their property is worth.