Brace yourself for a shock when the Reserve Bank meets next Tuesday

Brace yourself for a shock when the Reserve Bank meets next Tuesday. Here’s why:


The GDP number announced yesterday was 0.8%, far higher than economists predicted for the March quarter.


That, coupled with the soaring cost of living thanks to Vlad The Impaler’s war in Ukraine driving energy and food prices up, and you’ve got a perfect storm.

What does that mean for you? 

Higher inflation increases the likelihood that central banks will raise rates to curtail runaway prices.

The RBA is watching and that certainly leaves open the option that they will opt for a 50 basis point hike next week, which will be passed straight onto your variable loan mortgage.

Last week I wrote, “an almost certain increase in rates in June by at least 0.25% but budget for a 0.5% increase – stranger things have happened,” – now I think it will happen!  

In other news, data out this week show Australian house prices fell 0.1% in May, their first decline since the pandemic. The main drivers behind the downturn are poor affordability with prices up nearly 29% over 21 months, rising mortgage rates, a rotation in spending away from housing, and a decline in home buyer confidence.