RBA interest rates: ‘You can’t rule out a further rate hike in Australia’

The Reserve Bank of Australia’s appetite for above-target inflation will be tested by fresh predictions the economy will neatly skirt a hard landing, leading a minority of economists to conclude further tightening cannot be ruled out.

Rabobank’s Ben Picton is among a handful of economists who warn that the next RBA move could be a rate rise.The RBA has lifted the cash rate 13 times to 4.35 per cent to tame inflation, which peaked close to 8 per cent in 2022, while aiming to keep the gains made in employment. Such a result would still be well outside the RBA’s 2 per cent to 3 per cent target as the economy adapts to higher borrowing costs.Economists point to a range of economic indicators as evidence that activity is picking up, albeit timidly.

“With the economy on the mend, there’s only limited scope for the RBA to ease policy,” said Marcel Thieliant, Capital Economics’ head of Asia Pacific, adding that Westpac’s leading index points to gross domestic product growth of around 3 per cent, instead of the 1.5 per cent recorded in 2023.“That’s good for disposable incomes, and it means that there’s maybe a bit of consumption impetus coming back into the economy,” said Ben Picton, a senior strategist at Rabobank.

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