Westpac, NAB expect interest rate around 3 per cent by year-end

“The RBA can’t just hope that the (long-delayed and still uncertain) unwinding of global inflationary pressures will return inflation to target.”

In April, a household with an $800,000, 30-year mortgage was making repayments of almost $3,600. Their repayments would reach $4,413 a month at a cash rate of 2.85 per cent, and $4,664 at 3.35 per cent.

Over a year, a household could end up facing an $18,100 lift in their repayments if Westpac’s forecasts prove correct.

Governments around the world are struggling to deal with the political fallout from soaring inflation and the response of central banks, which have started tightening monetary policy.

Treasurer Jim Chalmers, who is due to give parliament an update on the budget’s key economic forecasts next week, said on Friday the government could not “pretend away” the serious economic challenges Australia was facing, including rising inflation and falling real wages.

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“We do have this genuine cost-of-living crisis in our economy,” he told reporters. “People are finding it incredibly difficult to keep up with the high and often rising costs of groceries and petrol and electricity and other essentials.”

Chalmers will make his economic statement the day after the Australian Bureau of Statistics releases the June-quarter inflation report, which economists are tipping will show inflation at 6.2 per cent – ​​its highest annual rate since late 1990.

Commonwealth Bank economist Stephen Wu said prices for essentials including petroleum and groceries would be the largest drivers of higher inflation.

“As households are less able to reduce consumption of these essential goods and services, and with real wages firmly negative, the picture for households is not positive,” he said.

ANZ’s head of Australian economics, David Plank, thinks official interest rates will edge into the low 3s by November.

He said a spike in next week’s inflation figures could force the RBA to move faster than expected.

“A big upward surprise could see the RBA move 75 basis points in August, though we think 50 basis points is more likely at this stage,” he said.

Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.

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