Millions of Australians face the prospect of higher mortgage repayments alongside soaring petrol prices, as economists increasingly expect the Reserve Bank of Australia (RBA) to raise the cash rate to 4.1% at its upcoming meeting. The potential rate hike follows comments from RBA deputy governor Andrew Hauser, who noted that data had confirmed the economy has limited spare capacity and that further increases in energy prices from Iran would be an unhelpful development.
Financial markets now price in a 64% chance of back-to-back rate hikes after the February move, with analysts from Westpac and NAB anticipating rises at the next two board meetings. This would reverse the trio of cuts delivered last year when inflation dropped to 1.9% before reaccelerating through the second half of 2025.
Westpac's chief economist, Luci Ellis, described soaring oil prices as having a 'large but temporary' impact on inflation, but said the central bank would 'nevertheless feel compelled to act'. George Tharenou, chief economist at UBS, noted that Hauser's 'hawkish' comments had caught the market off guard, but expected the rate rise recommendation to be thoroughly debated by the board, potentially resulting in a non-unanimous vote.
Petrol prices have surged across Australian cities, with Sydney and Brisbane averaging $2.18 a litre, Melbourne $2.16, Canberra $2.12, and Perth $1.94. According to AMP analysis, average weekly petrol bills have hit a record high of over $73.15, up nearly 25% from the February average. The Brent crude oil price climbed to nearly US$120 before collapsing to US$88.23, still 40% higher than at the start of the year.
Hauser said the central bank was updating its inflation forecasts in response to the energy cost shock, noting that inflation at 3.8% was already 'well above our target range' of 2% to 3%. However, he acknowledged that higher energy costs could weigh on the global economy, which would argue against a rate increase. 'If ever there was a time when board members will earn their meagre salary, it will be this month,' he said.
