Experts warn that another interest rate increase by the Reserve Bank of Australia (RBA) could push the nation into an avoidable recession, particularly if it’s not already in one. This forecast comes from an article by Roy Morgan, co-authored by chairman Gary Morgan, CEO Michele Levine, and marketing Director Julian McCrann. They describe the anticipated rise in rates as a potential error that could exacerbate economic challenges.
The RBA board is set to meet today at 2:30 pm, with expectations of raising interest rates by 0.25 per cent, which would bring the total to 4.35 per cent. This increase marks the third consecutive month of hikes, following a brief pause that provided some relief to homeowners.
The Roy Morgan article expresses concern over declining business confidence and increasing pessimism among consumers, calling on the RBA to refrain from a decision that might trigger a ‘recession we don’t have to have.’ Recent data shows that the Roy Morgan Business Confidence index fell sharply by 14.2 points to a record low of 76.5, even lower than the previous record set at the beginning of the COVID-19 pandemic. Similarly, the ANZ-Roy Morgan Consumer Confidence Rating stands at just 67.8, significantly below the neutral level of 100, marking one of the lowest confidence readings in history.
The article stresses that further interest rate hikes could intensify mortgage stress and unemployment, causing unnecessary damage to the Australian economy and raising the prospects of a deep recession. According to a survey conducted by Finder, one in ten mortgage holders—approximately 297,000 borrowers—might struggle to meet their home loan repayments if faced with additional increases.
In summary, there is a growing consensus among experts that the RBA’s potential decision to raise interest rates again is fraught with risks, and if conducted, it could significantly worsen Australia’s economic landscape.