rba

Governor Philip Lowe took a more dovish tone in announcing the central bank would leave the cash rate target at 3.6 percent, as markets welcomed the chance to let the 350 basis points of tightening already engineered to take full effect on the economy.

Recent buyers of homes are at the greatest risk of negative equity, and the rising interest rate environment increases the likelihood that some homebuyers will default on their loans. With Australia’s large cohort of new homeowners, that could lead to losses for the big banks.

Increased traffic volumes and higher earnings have provided valuation support for the infrastructure company, ClearBridge Investments’ Shane Hurst says, with the post-COVID-19 recovery positioning the business for solid growth.

Australia can still avoid a recession, RBA Governor Philip Lowe told Parliament in dual grilling sessions in Canberra – while he was keen to remind the country of the need for further belt-tightening and a drop in inflation expectations to keep the path to a soft landing open.

The regulator will look into the discrepancy between the interest rates banks charge borrowers and those they pay depositors, as the RBA’s rate-hiking campaign propels the big four banks toward record profits.

Analysts agree Australia’s big four banks are entering 2023 from a position of strength as they pass on rising interest rates to borrowers. However, headwinds remain, and the total return picture for shareholders looks more complex.

Australians are being hit hard by rising interest rates as banks seek to keep pace by lifting borrowing costs, and the RBA’s latest move will only add to the pain. Mortgage payments for employee households soared 27 per cent in the December quarter alone, and further increases are expected.

While avoiding recession is possible, the continuation of restrictive macroeconomic policies for the near term is needed to fight inflation, according to the IMF’s annual economic report card for Australia – and tax reform and stronger housing policies would also help.

As the RBA’s rate hiking campaign appears to approach its peak, investors looking to lock in term deposits should shop around to find the best rates, analysts say, warning that the complacent risk missing out.

Highly anticipated new consumer price data showed the inflation rate in Australia hit its highest level since 1990 in the December quarter. But analysts are mixed on whether inflation will moderate later this year or become more entrenched.