It’s very difficult to predict where rates will be in five years’ time. Certainly, RBA Governor Phil Lowe has changed his tune about the timing of rate rises, eluding today to a possible hike later this year. The other thing he said was that rates will definitely go up and mortgage holders need to prepare for that. To me that sounds like a definite shift in his stance of only a few months ago when he was still saying there will not likely be a rate hike until 2024.
With the likely scenario that the Fed will raise rates 3-4 times in 2022, and as early as March, I think the RBA will follow their lead later this year. Likely to be between August and October. The Fed has recently stated they’re prepared to raise rates faster and higher if needed, to curb inflation. They’ll probably go up at least 7-8 times this cycle, putting the US cash rate at upwards of 2% by late 2023. The RBA will probably hike a tad less, and be a step or two behind the US, to keep a lid on the AUD, so maybe 5-6 times by end 2023, for a cash rate of 1.5%. Westpac’s chief economist Bill Evans predicts the cash rate will likely be 1.75% by March 2024. If that plays out, expect a complete reversal of the recent property price rises by then.
