Ignore the RBA, the CBA has made its rate call

We’ve spoken a lot recently about interest rates and inflation, with the Reserve Bank hinting repeatedly last year that it doesn’t intend to increase the official cash interest rate until 2024.

But it appears the tides are changing, and that interest rate increase could come sooner than expected.

Last night on Money News I interviewed Gareth Aird, the head of Australian Economics at the Commonwealth Bank. Mr Aird gave us some insight as to how the CBA sees the next 12 months playing out, and it’s not great news. The CBA expects:

  • the RBA will lift rates by 0.15% in June.
  • the RBA will make 3 more rate rises by the end of the year, as they rarely do a singular rate rise.
  • the CBA sees inflation growing by around 1.5% for the March quarter.
  • 2023 will see double-digit percentage falls in the property market.

What does that mean for you and me? The obvious answer is increased mortgage costs for property owners, and increased rents for tenants.

That might seem obvious, but there are over 1 million homeowners in Australia who have never experienced an interest rate increase – the last hike was in 2010 and it’s been all downwards since then.

The question is, are you prepared to weather the storm of increased costs, and decreasing home values? If not, now is the time to get your affairs in order.

You can listen to the full interview with Gareth Aird here.

In other news, we are in the heart of reporting season and the standouts for me have been:

The Big Australian benefited from soaring commodity prices and booked a staggering half-year profit of $US9.4 billion, that’s almost $14 billion Aussie dollars of pure profit in just six months. In even better news, most of that cash will be returned to shareholders — BHP will pay a record interim dividend of $2.10 a share, smashing all expectations.  

Seek yesterday announced better revenue and profit than expected with a labour shortage particularly here and in New Zealand. The CEO said, “market conditions across our ANZ and Asia businesses were favourable for revenue growth. Businesses continued to rehire following COVID-related cuts, and in many cases restarted investment.

CSL Limited has announced a reported net profit after tax of $1.76 billion for the 6 months ended 31 December 2021, down 3%, or 5% on a constant currency basis. This result was above market expectations however interestingly flu vaccines drove all growth. They also recently had an oversubscribe raising for their purchase of Vifor Pharma Ltd.