Rates continue to rise as pressure grows on RBA

REPAYMENTS on a $1m loan will be nearly $1000 a month higher than they were in April after an unprecedented fourth official interest rate increase in fewer than 100 days.

However, some economists now believe the Reserve Bank of Australia’s run of 0.5 per cent hikes is over following the latest jump, from 1.35 per cent to 1.85 per cent.

The RBA’s decision to elevate the cash rate to a level not seen since April 2016 came as it faced more criticism over its handling of monetary policy.

Jason Falinski, who was chair of the House of Representatives Standing Committee of Economics until the May federal election, told News Corp it took RBA Governor

Philip Lowe too long to abandon guidance the cash rate was “very likely” to stay at 0.1 per cent until 2024.

“I think the biggest and fairest criticism is that as of February this year, he was telling the public that they would not be seeing interest rates increases until 2024 and then he conceded under a barrage of questions (from our committee) that maybe (there would be an increase) in 2023, but only at the very end,” Mr Falinski said.

“And three months later he was increasing interest rates.

“There would have been a lot of people making decisions about investing in houses, shares and businesses that would have relied on that forward guidance.”

Mr Falinski was responding to calls by leading economist Warren Hogan for Mr Lowe and the RBA board to resign over that guidance.

AMP chief economist Shane Oliver said during the pandemic, the RBA “overdid it” with that guidance and wouldn’t want to get “wrongfooted again” by increasing rates too much more from here.

“We are already seeing signs that households are feeling stress,” Mr Oliver said.

Treasurer Jim Chalmers stayed out of the debate about the RBA’s performance.

“Our job is not to try and influence the Reserve Bank or second-guess their decisions,” he said.

In announcing the latest rate increase on Tuesday, Mr Lowe said: “The board places a high priority on the return of inflation to the 2 to 3 per cent range over time.”