Two of Australia’s big-four banks, the Commonwealth Bank and the ANZ, have confirmed they will lift variable mortgage rates by 0.50 percentage points.
The banks’ announcements on Wednesday afternoon came as Treasurer Jim Chalmers warned inflation was about to get “significantly higher” – although he expected interest rate rises to put a lid on spending.
The two big banks joined other lenders, including rival Westpac, in announcing they would pass on the full 0.50 basis point rate rise confirmed by the Reserve Bank of Australia on Tuesday.
The RBA move – the first time in since February 2000 it has raised rates by 0.50 basis points – took the official cash rate to 0.85 per cent.
Earlier on Wednesday, Macquarie Bank, Bank of Queensland and ME Bank were among smaller lenders to confirm their variable rates would also rise.
Westpac was the first to move, acting within hours of the RBA decision on Tuesday.
“The majority of our customers are ahead on mortgage repayments and have a buffer available to help them manage an interest rate increase,” Westpac consumer and business banking head Chris de Bruin said in announcing the bank’s decision.
National Australia Bank is the only big bank yet to make an announcement.
Some institutions are also lifting rates for savings accounts.
Also on Wednesday, Dr Chalmers told a conference hosted by Sky News and The Australian that he aims to hand down his first budget on October 25 after providing an economic update to the parliament when it returns in July.
He said he expected interest rate rises would dampen activity in the economy while affecting house prices and savings.
“They [interest rate rises] will also have a disproportionate impact on people on the lowest incomes, people who haven’t been able to build up those buffers in their own personal finances,” he said.
“All of this will flow through to the budget. They will put significant pressure on a budget that already has its share of difficulties, including a relatively significant structural deficit, and now with those higher borrowing costs.”
Dr Chalmers’ comments came after the RBA lifted rates for the second consecutive month. The bank board also flagged further increases would be needed to contain inflation.
He agreed inflation is a major challenge, but he did not believe the economy faced the risk of a recession trying to curb it.
“That’s not on my list of fears for our domestic economy,” he told the conference.
“I genuinely believe that we have, certainly in the medium term, more opportunities than challenges, but the challenges we have right now are incredibly serious and incredibly significant.”
Business Council of Australia chief executive Jennifer Westacott also told the conference she did not believe Australia faced another recession.
But Ai Group chief executive Innes Willox was not so optimistic.
“We are now at risk of a wages and inflation and interest rates death spiral,” he told Sky News, noting the upcoming minimum wage decision by the Fair Work Commission.
“We are unfortunately in a period where we are going to see increasing interest rates if we continue to see calls for wage increases that are not sustainable.”
Dr Chalmers also said he thought there was “a really big opportunity here to have a stronger economy and a stronger society after COVID-19 than we had before”.
“Australia can take its place at the absolute first rank of national economies in the world. But first we need to navigate together these choppy waters,” he said.