Will the RBA hike the cash rate in April 2023? CBA, ANZ, NAB, and Westpac home loan predictions

It’s been nearly one year since the Reserve Bank of Australia began raising the cash rate to curb inflation, taking us from 0.10% in May 2022 to 3.60% in March 2023. Many economists agree we’re approaching the end of this tightening cycle, as the economy has shown signs of contraction. But has the RBA gone far enough in its crusade to slow the economy?

Let’s unpack the predictions for the 4 April RBA meeting and consider where home loan interest rates will land.

At the moment, the Australian economy teeters at a tipping point. Consumer confidence is down and property prices appear to have bottomed out amidst abysmal sale stock. Retail trade has shown modest growth, largely trending flat throughout the summer, though it’s still too high to halt runaway inflation, which clocked in at 6.9% over the year to February 2023. 

While this is markedly down from the 8.4% and 7.6% reported in the year to December and January, respectively, it’s still stubbornly above the 2% - 3% RBA target. 

“There are indications coming through that say the Reserve Bank needs to go a little bit further, but then there are other indicators that say that it shouldn't go any further,” explains Mozo banking expert, Peter Marshall. 

“So it’s really hard to make a call on which way the RBA will choose to play it. People are already feeling the cost of living pressures acutely. But at the same time, inflation hasn’t come down far enough. Spending hasn't really slowed as much as the Reserve Bank would like. And then there are lots of things going on in the banking system internationally that suggest that perhaps now is not a great time to increase interest rates, so could definitely go either way.” 

Last month, both the US and UK reserve banks lifted their own official interest rates by 0.25%, despite both economies experiencing signs of contraction. As guardian of Australia’s monetary policy, the RBA would have good reason to want to move 0.25% in April as well to remain competitive with some of our biggest trading partners. 

However, with growing calls for respite at home, the RBA may keep its eyes on our own island for now. When announcing the March decision, RBA governor Philip Lowe softened his language about the path of future rate hikes, indicating that the board will heavily watch economic indicators as they chart a course forward. 

“The Reserve in Australia may decide that it can wait a month before raising rates, just to take a little breather,” says Marshall. 

“It would be good, I think, if they did take a break, but that doesn’t mean there are no more rate rises at all.”

So the RBA may have another 0.25% cash rate movement in store. The question remains: will we see it in April, or later down the track?

At the time of writing, the Big Four banks are split down the middle as to whether we’ll get a 0.25% bump to the cash rate in April. Everything is less of a certainty and more of a coin flip. 

Westpac argues the RBA will pause in April before moving again for the last time in May, bringing the final cash rate to 3.85% for the cycle, before the RBA makes 1.50% worth of cuts throughout 2024 - 2025.

Similarly, CBA believes there's a 55% change the RBA will pause in April before potentially moving in May if there's an economic case for it until any rate cuts in 2024. The big bank concedes there's a 45% of a 0.25% hike in April. 

ANZ and NAB foresee two more movements over the next three months, bringing the final cash rate to a staggering 4.10%  in June. Both predictions involve a steady hand either in April or May.

Cash rate peak predictions from the big banks (30 March 2023)

Out of all the Big Four banks, only Commonwealth Bank and NAB have consistently made the right call over the last six months – others have usually skewed too hawkish in their estimates. But as the predictions narrow and the cycle ends, it may be too close to call.

After scrambling to raise rates for so long, the idea of the ship holding steady seems almost alien. So what would a constant cash rate mean for the rest of 2023?

“A steady cash rate gives people a bit more confidence to plan their futures: to buy houses, borrow money, spend money, all the stuff that says the economy is alive,” says Mozo expert Peter Marshall. 

Most urgently, however, Marshall warns that the moment rates hold or even drop, the property market could explode again. This would mean a sharp rise in prices, strong competition at auctions, and for sale signs that disappear within days. 

“The number of houses for sale right now is incredibly low,” explains Marshall. “It has been since the start of this year. I’ve seen plenty of evidence that people are willing to pay silly money just to get the deal done and have a house.”

“So I think as soon as people get the confidence that the RBA is done or pretty much done with increasing rates, it’s all going to take off again and will go like a rocket.”

As such, now may be the perfect time to move on a property if you can. So run your finances through the first home buyer checklist, do an insurance inspection, and get your ducks in a row. 2023 may be the most interesting year for property yet.

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