Experts also weighed in on other economic issues
The nation’s experts have agreed that the Reserve Bank will hold the cash rate at 4.1% today, according to a survey by comparison site Finder.
This month’s Finder RBA Cash Rate Survey, in which 38 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy, also found a slight increase in the panel’s forecast for the cash rate peak, from an average of 4.1% to 4.3%.
Graham Cooke (pictured above left), head of consumer research at Finder, said it was the first time this year that every expert in the survey had predicted a hold.
“Aussies are being hit with price increases almost everywhere – and we have seen a sharp rise in stress caused by housing, energy, petrol, and grocery bills,” Cooke said. “Another rate hold will be welcome news to the many homeowners who are already at the end of their tether.
“Our data shows that many households are at breaking point – 36% of mortgage holders struggled to pay their home loan in September. Despite the RBA’s prudent pause in interest rates since July, inflationary pressures are persisting.”
The survey showed that 48% of the respondents believed the cash rate has peaked at 4.1%, while a further 42% held that the rate will peak at either 4.35% or 4.6%.
Leanne Pilkington (pictured above right), from Laing+Simmons, said recent speculation has focused on when the central bank will cut rates instead of lifting them again.
“Inflation is the variable to watch and as evidenced in the latest CPI data, the upward pressure applied by high petrol prices is concerning for mortgage holders,” Pilkington said. “Still, we believe a hold pattern for at least the next few months is the most appropriate course of action.”
Harry Murphy Cruise, of Moody’s Analytics, too, believed a hold will be RBA’s next move, given the improvement in inflation, and despite a stumble in its downtrend in August as well as some pain points that he said were outweighed by the positives.
“Rates have risen quickly—a cumulative 400 basis points since April last year,” Cruise said. “And the full impact of those hikes has yet to be felt. What’s more, a pause from the RBA won’t be akin to a cut. Household budgets will be under pressure as long as interest rates hold at current levels; that will keep spending tight and put downward pressure on inflation.”
Thousands could lose their job before Christmas
Unemployment rate is expected to rise to 3.9% by the end of the year, the survey showed.
That’s just really bad news for the whopping 44% of Australian workers who, according to Finder’s Consumer Sentiment Tracker, couldn’t survive financially for more than a month if their income dried up. The Finder research also revealed that 18% of workers are living day to day and will only be able to make ends meet for a week or less should they lose their job.
“We need to see unemployment rise, unemployment has to jump 40-50%, in my view,” said Tim Gurner, founder of Gurner Group, at the Financial Review Property Summit. “We need to see pain in the economy. We need to remind people they work for the employer, not the other way around.”
This sentiment is not shared by the majority of experts.
Cooke said a worrying number of Australians could become jobless.
“Even a small increase of 0.2 percentage points in the unemployment rate would mean over 30,000 Aussies losing their jobs,” Cooke said.
James Morley, of Sydney University, agreed.
“There is absolutely no empirical evidence to support the idea that high unemployment increases productivity. Indeed, most of the evidence points the other way,” Morley said.
Stella Huangfu, from the University of Sydney, said this is not the way to improve labour productivity.
“It is also not realistic to expect that unemployment could jump by 40-50% from its current level,” Huangfu said. “People are suffering a lot already from the cost-of-living crisis and extremely high mortgage burden.”
Wage growth unlikely in 2024
Despite significant wage growth in the past two years, especially for those on lower incomes, the real value of wages fell 3% this year due to inflation, RBA data showed.
Nearly three in four experts did not expect real wage to see any growth in 2024.
Peter Boehm, from Pathfinder Consulting, said rising unemployment and increased immigration may dampen real wage growth.
“Additionally, most SMEs cannot afford to offer wage increases at inflation simply because of operating cost pressures,” Boehm said.
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