Why Hiking Interest Rates Now Could Be a Costly Mistake, According to Experts

Analysts caution that another hike in interest rates today could steer Australia into a recession—if the nation isn’t already facing one.

The warning comes from Roy Morgan’s chairman Gary Morgan, CEO Michele Levine, and marketing head Julian McCrann, who argue that the much-anticipated rate increase would be “a mistake.”

The Reserve Bank of Australia is set to convene its board meeting at 2:30 PM, with expectations of raising rates by 0.25 percent to 4.35 percent. Many economists predict further hikes before the year ends.

This would mark the third consecutive increase after a brief period of stability for homeowners.

The article also highlights growing concerns among businesses about the economy’s direction, while Australian consumers are reportedly becoming increasingly pessimistic.

“The Reserve Bank SHOULD NOT make a historic mistake tomorrow and raise interest rates again for a third straight month that will force Australia into the ‘recession we don’t have to have,” it said.

The article notes the latest Roy Morgan Business Confidence for April shows the index crashing 14.2 points in April to a record low of only 76.5.

That’s below the previous record low reached at the onset of the COVID-19 pandemic in 2020.

Plus the latest ANZ-Roy Morgan Consumer Confidence Rating is at only 67.8 – over 30 points below the neutral level of 100.

This is the seventh-lowest Consumer Confidence reading of all-time, it says.

“A further increase to official interest rates, tomorrow, on top of two interest rate increases by the RBA already in February and March – by a total of 0.5 per cent to 4.1 per cent – will increase mortgage stress, real unemployment and under-employment and ensure the damage to the Australian economy is needlessly increased and a likely deep recession guaranteed,” it says.

A survey by comparison site Finder shows one in 10 mortgage holders (297,000 mortgagors) would be unable to repay their home loan if they were hit by one or two more increases.

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