On the average Victorian mortgage of $634,000, a cash interest rate of 2.5 percent would increase repayments by $849 per month or $10,188 per year. At 3.5 percent, monthly repayments would be $1241 higher, while in a year’s time they would be nearly $15,000 more expensive.
One of the reasons financial markets are tipping the bank to raise interest rates next year is due to an increase in wage growth.
But dr. Lowe said that would mean cutting wages by 10 years, describing the chances of that happening in the coming months as “near zero”. Figures released by the Australian Bureau of Statistics on Wednesday are expected to show a pick-up in wage growth from current levels of 1.7 percent.
However, he admitted that interest rates could start to rise before 2024, especially if global inflationary pressures became embedded in international supply chains.
Chancellor of the Exchequer Simon Birmingham said Dr. Lowe took an informed view of global inflationary pressures, which he described as transient.
He said the government was committed to keeping job growth high and cutting unemployment to 4 percent in an environment where “interest rates remain largely low”.
“We delivered one of the most exceptional economic results in the world,” he said.
But shadow treasurer Jim Chalmers said the government was fleeing the fiscal and economic mess it had caused
“This is a prime minister with a budget with a trillion dollars in debt and not enough to show it because it is absolutely littered with rubbish and riddled with waste and mismanagement,” he said. “He has a record of weak economic growth, stagnant wages, weak business investment, weak productivity, across the board.”
Gareth Aird, Commonwealth Bank’s Australian economics chief, said it appeared the RBA was convinced the road back to higher inflation – and higher interest rates – was a long one.
Mr Aird, who expects the RBA to begin raising interest rates in November 2022, said upcoming wages and inflation data could stumble the bank’s plans.
“It is up to the official quarterly printouts of Australian inflation and wages to prove that the RBA’s profile is too conservative, as the RBA has not used the offshore experience of higher inflation and wage results as a template for what may happen locally. ” he said.
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