A growing number of experts and economists are expecting the cash rate to hold on Tuesday, according to a recent survey by comparison website Finder.
In its monthly Finder RBA Cash Rate Survey, 16 out of 42 experts and economists expect the cash rate to hold, the highest number since May 2022.
Despite the rising number, two-thirds of the panel (62%, 26/42) forecast another cash rate hike, with the majority (60%, 25/42) forecasting another increase of 25 basis points – bringing it to 3.85% in April.
Finder head of consumer research Graham Cooke said this is the most divided panel since before the cash rate began to rise.
“More than 85% of economists have expected a cash rate increase every month since June 2022,” Cooke said.
“This result of 62% is the softest forecast we have seen for an increase since then and could very well be the month the pressure stops mounting on Aussie homeowners.”
Cooke said the panel has missed rate rises in the past, and household budgets are being spread thin.
“Just 1 in 5 experts expected a rate rise in May 2022 when the RBA started this rate rise marathon. Tuesday’s decision really is an either-way bet.
“Currently, financial stress is at a four-year high, with 4 in 5 Australians somewhat or extremely stressed with their financial situation,” Cooke said.
Impact Economics and Policy lead economist Angela Jackson said the RBA has a lot to weigh up this month, and the case for pausing is strong.
However, she added that given actions from overseas banks, it would appear unlikely that the RBA will pause this month, but said it should be the final increase for a while.
Laing+Simmons CEO and director Leanne Pilkington said pausing the rate rise cycle would be the right move.
“People need a reprieve and in the housing market, buyers and vendors need to know where they stand with a degree of certainty,” Pilkington said.
Beyond April, more than two-thirds of the panel (69%, 29/42) believe the RBA will hold the cash rate in May.
The survey also found that the vast majority of the panel (94%) believe that if there were a recession this year, it would not be as bad as the recession of the early 90s.
Panellists attributed this to the banks being much better regulated now compared to the 90s, interest rates less severe, and unemployment increasingly lower now.
Cooke noted one of the most interesting comments from NAB chief economist Alan Oster when speaking at Finder’s Cost of Living event was that the economic short-term looked uncertain, but he was glad he lived in Australia.
“It seems most experts think Australia will bypass any global recession in 2023, much as it did in 2007,” Cooke said.
University of Sydney associate professor at the School of Economics Stella Huangfu said the recession in the early 90s was caused by the extremely high interest rates at that time.
“This is not the case now,” Huangfu confirmed. “Once the inflation has returned to the RBA's target range of 2-3%, interest rates will stabilise.”
Monash University’s Melbourne Business School professor Mark Crosby said the starting point for unemployment is much lower, so any peak in inflation will be well below double digit levels of the early 1990s.
Meanwhile, Australian consumers are generating more pessimism when it comes to the chance of recession.
According to Finder’s Consumer Sentiment Tracker, a monthly nationally representative survey of more than 1,000 Aussies, nearly 3 in 4 (70%) now believe a recession is likely to occur in the next 12 months, up from 50% in March 2022.
“There is clearly a disconnect in what the economists and general population think about the economy,” Cooke said. “Let’s hope the experts are right.”
Huangfu added that in the past few months, Australia has seen the grocery price inflation drop significantly relative to other months.
“I do think we have seen the peak of inflation already,” Huangfu said.