Former Reserve Bank research manager Peter Tulip predicting three more interest rate hikes starting Tuesday
A former senior research manager with the Reserve Bank has warned home borrowers of three more rate hikes that would take mortgage rates to levels last seen in 2008.
The Reserve Bank of Australia is likely to raise interest rates three more times this year starting on Tuesday, taking mortgage borrowing to the highest level since 2008, a former RBA official warns.
Financial markets are broadly predicting the RBA’s monetary policy board will hike rates by another 25 basis points on Tuesday which would see the cash rate hit 4.35 per cent for the first time since February 2025, before the last election and the first of three rate cuts.
It would also be the third increase since February and mark the first time since March 2023 where the RBA has raised rates at three consecutive meetings, reversing last year’s relief.
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By continuing you agree to our Terms and Privacy Policy.The annual headline inflation rate of 4.6 per cent in March - the first full month of the Middle East conflict - is well above the central bank’s 2-3 per cent target.
Former Reserve Bank senior research manager Peter Tulip said the danger of higher inflation feeding into higher wages meant the RBA was more likely to hike rates three more times, to an 18-year high of 4.85 per cent, by the end of 2026.
This would add more than $350 to monthly repayments on an average, new mortgage.
“Most of the increase in inflation is temporary but not all of it and the risks of inflation being above the RBA’s target seem much, much greater than the risk of inflation being below,” Dr Tulip told The Nightly.
“The chances of prices feeding into higher wages are a sufficient worry to make the bank cautious in its monetary policy.”
Dr Tulip argued the Reserve Bank’s three rate cuts in 2025 were motivated by an overstated fear about US President Donald Trump’s tariffs, adding too many economists were now overstating the danger of a slowing economic growth from the Middle East oil crisis.
“I don’t think people do quantitative analysis of the effects of these international problems on the Reserve Bank’s objectives,” he said.
“Just because news is bad doesn’t mean it’s going to reduce Australian GDP - that was a problem with the trade war, it’s again a problem with the oil price.”
While weaker gross domestic product growth is a concern for some economists, the Middle East conflict and Iran’s blockade of the Strait of Hormuz is boosting global liquefied natural gas prices, and therefore the Federal Government’s collection of company tax revenue as the likes of Japan, Singapore and South Korea clamour for Australian LNG.
The RBA’s monetary policy board was split at the last meeting on March 17, with a narrow majority - or five out of nine voting members - in favour of a 25 basis point hike, that took the cash rate to 4.1 per cent.
“Given that it’s been split in the past, I suppose there’s a good chance it will be split tomorrow,” Dr Tulip said as the chief economist with the Centre for Independent Studies.
But Westpac chief economist Luci Ellis, a former assistant governor at the RBA who is also forecasting a 4.85 per cent terminal cash rate, said Reserve Bank governor Michele Bullock and her deputy Andrew Hauser would be pushing for a unified vote in favour of a hike given the high inflation and evidence of firms passing on higher costs on to consumers.
“I certainly think that the governor, the internal staff would prefer a unified vote this time around,” she told The Nightly.
“It will be important for them to make that case.
“The question is: can firms then push that through into their own prices? We’re just seeing an awful lot of firms doing it and maybe a little bit more.”
Higher interest rates in tandem with soaring building costs also have the potential to jeopardise Labor’s goal of building 1.2 million homes in the five years to June 2029.
In the year to March, 198,396 new residential houses and apartments were approved, which was well below the 240,000 annual average needed for the National Housing Accord target.
Weaker building approvals, from Monday’s Australian Bureau of Statistics data, is a leading indicator of future building completions.
“A higher interest rate environment doesn’t necessarily encourage even more housing to be built,” Dr Ellis said.
The 30-day interbank futures market is regarding a Tuesday rate hike as a 74 per cent chance, with three more RBA increases in total forecast for 2026.
Last month, 60 lenders had increased at least one fixed rate, Canstar data showed.
One more rate rise on Tuesday would add $117 to monthly repayments on an average, new mortgage of $717,000.
But three more hikes would see repayments climb by $355, compared with now, to $4766.
Three of Australia’s big four banks - Commonwealth Bank, NAB and ANZ - foresee the RBA cash rate climbing to 4.35 per cent on Tuesday and then staying there.
