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Homeowners’ hopes of a pre-Christmas budget boost have been crushed, with experts warning job losses, rising inflation and interest-rate hikes are now on the cards. EQ Economics and Judo Bank chief economic adviser Warren Hogan delivered the devastating blow, warning cash-strapped mortgage holders the best they can hope for is an interest-rate hold. “Thinking the next move in interest rates is down is completely inappropriate, as inflation heads above the RBA (Reserve Bank of Australia) target band and also the economy grinds out a recovery,” he told SkyNews. In an even more ominous warning, Mr Hogan points to the neutral cash rate being higher than previously thought. “Inflation has not left our economy and the big learning out of this is what is the right level of inflation for this economy?” Mr Hogan questioned. ”Everyone from market economists to the RBA believes the number is around 3 per cent for the (neutral) cash rate. Well, this inflation result highlights it could be closer to 4 (per cent), meaning we could be in for higher rates in a year or two.” Interest rates have been cut three times in 2025, bringing the official cash rate from 4.35 per cent to 3.60 per cent. Experts previously thought the neutral rate, which is neither restrictive or supportive towards economic growth, was closer to 3 per cent, meaning mortgage holders would likely get at least two more interest-rate cuts. ‘Economic horror story’ The grim warning comes after inflation reversed course in the September quarter, rising to its highest point in four years. Australian Bureau of Statistics figures show the crucial trimmed mean inflation rate hit 1 per cent for the quarter, beating the RBA’s predictions. The annual rate now sits at 3 per cent, higher than the 2.8 per cent markets were expecting. AMP deputy chief economist Diana Mousina labelled the inflation miss an “economic horror story.” ”The forecast miss may look small by just looking at the figures at only 0.2 percentage points, but for inflation data, this constitutes a big miss,” she said. The broader headline inflation, which includes volatile and seasonable items such as energy prices and foods, reached 3.2 per cent – its highest level in four years. Electricity costs, up 9 per cent this quarter as state government subsidies vanished, led the increase, while services inflation jumped 3.5 per cent, holiday travel climbed 2.9 per cent and housing expenses rose 2.5 per cent. NED-6058-Australias-Inflation-Rate Recession and job losses looming Mr Hogan warned that the RBA’s No.1 job was keeping inflation between 2 and 3 per cent, and it might be forced to push the economy into a recession to achieve this outcome. But he stopped short of blaming the central bank, instead pinning it on government policy. “The real issue is the massive growth in the size of the government and the big growth in our tax burden. This is going to complicate things in the next few years,” he said. ”If they do it, push the economy into a recession and unemployment rises, well, I think the responsibility for that outcome would be on the government.” Treasurer Jim Chalmers said on Wednesday inflation had ticked up, but it was “much lower than what we inherited and reflects the substantial progress made in the economy”. “Our policies including energy rebates, cheaper child care and our back-to-back boosts to Commonwealth Rent Assistance have helped to directly reduce inflation when it was at its peak to allow time for the structural drivers of inflation to settle and for underlying inflation to return to the RBA’s target band,” he said. Meanwhile, Commonwealth Bank head of Australia economics Belinda Allen said shoppers returning to the stores added to the case for interest rates to be kept on hold. “The economic backdrop for the RBA shifted over the third quarter. There is no doubt the cyclical upswing has occurred larger and faster than expected,” she said. ”A stronger consumer backdrop, we suspect, has allowed businesses to rebuild some of the margin pressure that has been faced after a couple of tough years.” Unemployment Figures Homeowners to cop it worst While Australians all have to deal with higher inflation rates, bRight Agent co-founder Aaron Scott said mortgage holders would continue to bear the brunt of the inflation fight. ”Yesterday’s inflation figures mean the RBA will probably keep rates on hold next week, which in turn means more pain for struggling households with a mortgage,” he said. Mr Scott noted the RBA had one large and blunt tool to fight inflation, which was to lift interest rates, which would hurt newer mortgage holders or those in higher levels of debt. “Given the ABS figures out yesterday, it looks like households will have to continue to do the heavy lifting for longer than anticipated in order to bring down inflation,” Mr Scott said. “The bottom line? Struggling families should brace for more pain, with no relief in sight.”
