Economists think a Melbourne Cup Day rate hike is an odds-on bet despite increasing evidence that households are winding back their spending.
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The Australian National University's RBA Shadow Board, comprising nine leading economists, reckons there is a 62 per cent chance that an increase in the official cash rate to 4.35 per cent on Tuesday is the right call - an assessment in line with the overwhelming majority of economists surveyed by the Reuters news services.
Investors are more cautious, putting the probability at close to 50-50.
The prospect of at least one more rate rise, and possibly more if inflation proves stubborn, will tighten the financial squeeze on millions of households carrying high levels of debt such as mortgages and increase the likelihood of higher rents.
Though rates of mortgage defaults and arrears remain low, the possibility that the four-months long rates pause could end has also intensified concerns about the mental and emotional toll on families.
Finance Brokers Association of Australia managing director Peter White said he was "deeply concerned" about predictions of a Melbourne Cup Day rate hike.
"I understand the need for the RBA to do what they feel is best for the nation economically, but surely as a society we also have to consider the human cost," Mr White said.
He said a survey conducted by the association earlier this year found "a huge spike in people seeking psychological help and other counselling specifically due to interest rates. I fear another rise may exacerbate this".
But shadow board chair Timo Henckel said inflation was well above the Reserve Bank of Australia's 2 to 3 per cent target band while the labour market remained tight, consumer confidence had picked up and the global economy had proved to be more resilient than had been expected.
Though there are signs that business conditions are softening, including a 3 per cent fall in the ANZ-Indeed job ads index in October, Dr Henckel said employment remained "remarkably resilient" and the world economy was outperforming most forecasts.
While activity in China had weakened and some European economies were "flagging", the US had dodged a recession and "the outlook for emerging market and developing economies is significantly more positive".
Treasurer Jim Chalmers said there was "lots of evidence" the economy was weakening, in part because of the China slowdown but also the impact of high inflation and interest rates on household spending.
The Treasurer added that high global oil prices were a "key driver" of inflation in the September quarter, and that the rise in the cost of services would have been even greater without government cost of living measures such as energy bill rebates, 60-day prescriptions and child care support.
But shadow board member, Westpac Group chief economist Besa Deda, said the September quarter consumer price index showed "upside inflation risks are materialising. Indeed, inflation could take longer to come down as a result".
Ms Deda said the 1.2 per cent jump in underlying headline inflation last quarter was much faster than the 0.9 per cent pace expected by the RBA.
The central bank has forecast underlying inflation to fall back within its 2 to 3 per cent target band by mid 2025 and in the minutes of its October board meeting it warned it had "low tolerance" for any delay beyond that point.
Ms Deda said this, combined with new governor Michele Bullock's recent testimony to a parliamentary committee that services prices were rising more quickly than the central bank was comfortable with, had implications for Tuesday's rates decision.
"Since the rate hike cycle began in May of last year, one variable has ranked consistently high on the RBA's watch list: inflation expectations. The RBA wants to ensure that inflation expectations do not become de-anchored," she said.
"There is some evidence in recent weeks that medium-term inflation expectations have begun to tick up, suggesting the RBA may need to lean in to arrest the trend."
The tough environment for borrowers has not hurt the performance of at least one of the the major lenders. Westpac announced on Monday has grown its full-year net profit by 26 per cent to $7.2 billion.
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Sydney University economist James Morley said the Reserve Bank had room to raise rates on Tuesday while still achieving a so-called soft landing for the economy, involving lowering inflation while limiting the increase in unemployment.
Centre for Independent Studies chief economist Peter Tulip warned the central bank risked even worse outcomes for the economy if it failed to respond to the latest inflation numbers.
"If the RBA signals acquiescence with that, inflation expectations will increase, leading to more unemployment in the future," Mr Tulip said.
Ms Deda said it was "quite possible" that a Melbourne Cup Day rate hike would be the last in the current monetary policy cycle, but "the high uncertainty attached to forecasts in the current environment means further tightening in the next six months cannot be fully ruled out".
Dr Henckel said that even with a November 7 rate rise, there was "still sufficient concern among [RBA Shadow Board] members that this might not be the last one, that higher rates will be yet called for".
But, more optimistically for embattled borrowers, the shadow board thinks there is a 42 per cent chance that a rate cut will be the best policy this time next year.