Reserve Bank of Australia expected to raise cash rate to 4.85% amid slowing economy
The RBA is likely to implement a 0.25 percentage-point increase, marking its fifth hike this year and pushing the cash rate to an 18-year high as property prices fall and growth slows.
Australia's central bank is expected to raise the cash rate by 0.25 percentage point to 4.85%, the highest level since 2008, in its fifth interest-rate increase this year. The move comes as the Commonwealth Bank of Australia (CBA) revised its forecast for national dwelling prices, now anticipating a peak-to-trough decline of about 14%.
CBA senior economist Trent Saunders said the price downturn has accelerated in mid-sized state capitals such as Brisbane and Perth, but he expects prices to stabilise late next year. The bank's updated economic outlook links the slowdown to the prolonged Middle East conflict and a more aggressive monetary policy stance.
Economists project that real GDP could fall to around 1% by mid-2025, roughly half of earlier estimates, with growth through 2027 barely above 1%. Treasury Minister Jim Chalmers warned Australians are facing a “difficult decision” as another rate rise would increase borrowing costs, adding roughly $119 to the monthly repayment of a typical $731,000 mortgage at a 6.2% rate.
New South Wales Premier Chris Minns cautioned that the rate hike could have a “disproportionate impact” on the state’s economy, given its high house prices. Prime Minister Anthony Albanese, speaking from a Commonwealth meeting in Antigua and Barbuda, emphasized the government's focus on cost-of-living pressures and the need for international engagement to strengthen the economy.
Chalmers also indicated that the upcoming federal budget will seek additional savings, noting that all previous budget updates have delivered net savings and that the expenditure review committee will continue its work on fiscal consolidation.