Reserve Bank lifts cash rates 0.5pc to 1.35pc Ronald Mizen
Jul 5, 2022 – 2.31pm
The Reserve Bank of Australia increased the official interest rate for a third consecutive month on Tuesday with a 0.5 percentage point rise to 1.35 per cent, as it moves quickly to curb strengthening inflation.
If fully passed on to borrowers, recent rate rises would add $333 to monthly repayments for a typical $500,000 mortgage, $499 for a $750,000 mortgage, and $665 for a household with a $1 million loan, according to RateCity.
The RBA’s push to normalise the cash rate from the emergency level record low 0.1 per cent is adding pressure to household budgets already being squeezed by price rises on everything from fruit and vegetables to petrol.
“Today’s increase in interest rates is a further step in the withdrawal of the extraordinary monetary support put in place to help insure the Australian economy against the worst possible effects of the pandemic,” Dr Lowe said.
“The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed.
“The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead.”
Dr Lowe said the size and timing of future interest rate increases would be guided by the incoming economic data, including the June quarter inflation figures out on July 27, and the outlook for the economy.
Reflecting the expectations of economists and financial markets, Treasurer Jim Chalmers on Tuesday said it was his “strong expectation” there would be more interest rate rises throughout the course of the year.
“Rates were expected to rise, and they’re expected to bite,” Dr Chalmers said in a statement immediately after the RBA’s decision.
”When it comes to inflation we expect it to get worse before it gets better, and the Reserve Bank has flagged further rate rises.
“While the trajectory of rising interest rates was set before the election, this rate rise is another blow to workers and families already under significant cost of living pressure.”
The Treasurer said he also expected current flooding of large parts of NSW to put further upward pressure on prices.
“Grocery prices are already skyrocketing, and natural disasters like this are notorious for making that challenge worse. We already expected the inflation challenge in our economy to get worse before it gets better and this, unfortunately, we will be part of that.”
