The Reserve Bank of Australia (RBA) board has hiked the cash rate 13 times since mid-2022, leaving it at 4.35% at the time of writing.

The cash rate is the major driver of interest rates, which have crushed the budgets of many Aussie borrowers in recent times.

And things could be about to worsen for those with debts.

Judo Bank economic head Warren Hogan – among the most accurate RBA forecasters of 2023 – believes inflation has gotten out of hand and the RBA board will be forced to act. 

He predicts there could be as many as three cash rate hikes in 2024, potentially seeing it soar to over 5%.

“We have to keep the economy soft for an extended period to get inflation down – there's a chance that we are not remaining soft, that there is something of a recovery happening,” the veteran economist told the Savings Tip Jar podcast on Tuesday.

With inflation of 3.6% taken into account, the real cash rate is only 0.75%; Mr Hogan says a balanced economy sees a real cash rate in the 2% range, implying even more than three rate hikes might need to happen.

“If that continues to play out, I think it's essentially telling us that the 4.35% cash rate isn't the right level.

“Ultimately, it looks like we may need to get that cash rate up to around 5% … if we want to be confident inflation is going to go all the way down to 2% to 3%.” 

Out-of-control inflation could tear homeowners’ pockets 

That latter range is the target of the central bank, and it’s a target that has only been met for five out of the past 40 quarters.

The most recent quarterly inflation read – released last week – brought a notable upside surprise.

The Australian Bureau of Statistics revealed the consumer price index (CPI) rose 1% quarter-on-quarter over the three months to 31 March, bringing annual inflation to 3.6%. 

“My reading of the tea leaves over the last six weeks has shifted my central case,” Mr Hogan said. 

“[I now think] it's more likely that we'll see a couple of rate hikes in the second half of the year.”

Right now, the typical interest rate on an outstanding variable home loan is 6.40% p.a., according to RBA data – more than 2% p.a. higher than the cash rate.

It stands to reason, then, that a cash rate of over 5% could see typical borrowers paying more than 7.1% p.a. on their mortgages.

Such an increase would represent an extra $350 a month on a $600,000, 30-year home loan.

Interest rate (p.a.)

Monthly repayments on $600,000, 30-year mortgage











Source:’s Home Loan Calculator

“Hopefully, I'm wrong,” Mr Hogan said.

“But, at the moment, what worries me is actually the activity side of the economy, and then we've got these tax cuts coming in, that's going to give household incomes a real boost. 

“Activity picking up now is inflation picking up down the track – that's just a basic fundamental of macroeconomics.’”

However in a sign pointing to the opposite, the latest retail trade figures, released in the wake of the podcast's recording, saw a 0.4% month-on-month downturn in consumer spending.

Mr Hogan told social media, there was "nothing in those numbers that support a rate hike view".

With population growth taken into account, the decline is even more pronounced.

Westpac backs down from forecasted September rate cut 

Mr Hogan’s about-face comes on the back of several months in which consensus was the RBA board’s next move would be a rate cut.

Indeed, all four major banks still believe that will be the case. 

However, Westpac retreated from its previous call of a September rate cut on the back of the latest inflation data.

That might be particularly noteworthy due to the addition of former-RBA assistant governor Luci Ellis to the bank’s economic helm late last year.

Ms Ellis is generally thought to have brought notable insight into the central bank’s operations to the Westpac team.

“[The RBA board] will probably continue to be cautious about services inflation and domestic pressures broadly for a few months yet,” she said on the release of the latest CPI data.

“We therefore do not expect any change to the messaging about not ruling anything in or out for another few months.”

Westpac’s forecast for a November cut is now in line with those of NAB and ANZ, with CommBank suddenly alone in predicting a September rate cut. 

Mr Hogan stated that, if he were charged with making cash rate calls, he’d be following in RBA governor Michele Bullock’s lead and not ruling any future move in or out.

“I think the debate’s been off the mark in this country for the last three months,” he said.

“It's all been about the timing of the rate cut like it was a done deal, and that's actually dangerous, in my view.

“Not only does it not reflect the reality … but, of course, if indeed we do go down this pathway of having to raise rates a couple of times, you’ve got all these people in the housing market, and doing various decision making thinking that [a] rate cut is a done deal.”

Mr Hogan hopes his commentary realigns the narrative, bringing a potential rate hike back into the national conversation.

“That might come at a cost to me if they don't actually end up raising rates,” he said.

“But … it's about trying to get a more balanced conversation in the community.”

Image by wirestock on freepik

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