Nation’s Experts Split On Cash Rate Rise

While almost all 36 panellists surveyed in this month’s Finder RBA Cash Rate Survey (94%) expect a cash rate hold to be announced in February, the same sentiment is not held for the year ahead.

More than half (58%) are predicting a rise this year while just 1 in 5 of the experts panelled expect the rise to happen in the first half of the year.

Graham Cooke, head of consumer research at Finder, noted a shift in expectations of a rate rise in 2022.

“A rate rise this year has moved from an ‘impossibility’ to a ‘most likely’,” said Mr Cooke.

“With some lenders indicating multiple rises to come, Australian borrowers who purchased over the last few years of rock-bottom rates may be in for a shock when their mortgage costs start to climb.”

Many experts have cited the concern of inflation and the unemployment figures reaching the RBA’s target ahead of schedule as a reason to get moving.

Ben Udy, from Capital Economics thinks that the first rate hike will come in the middle part of the year.

“While the RBA has previously said that it would not raise rates until wage growth was at least 3%, we think the strength in underlying inflation along with the tight labour market will convince the Bank to hike rates first in August and lift rates to 1.25% by the end of 2023,” Udy said.

However, opposing Ben Udy, Saul Elake of Corinna Economic Advisory states three reasons we won’t see a rate rise this year.

“One, underlying inflation has only just entered the target band after more than 5 years below it, and remains lower than in most other advanced economies.

“Two, wage inflation is nowhere near the 3.5% the RBA has said it needs to be to be consistent with inflation being ‘sustainably’ within the target band.

“Three, the RBA has a looser inflation target than most other ‘advanced’ economy central banks,” Eslake said.

It begs the question, how much will average mortgages rise when rates do.

Almost all experts believe that rates have hit rock bottom (96%).

Graham Cooke’s advice is to lock in a loan at a very low rate.

“The days of sub-2% home loans are almost behind us, and may never return. If you are in a position to lock on a very low rate with your current lender, or by switching, there has never been a better time to do it,” Mr Cooke said.

Westpac is expecting the RBA to raise the cash rate 6 times in the next 2 years, starting in August this year.

This would bring the official cash rate up from 0.10% at present to 1.50% in 2 years’ time – a jump of 1.4% on what homeowners are paying now.

On a $500,000 home loan, a rate hike from 2.00% to 3.40% would cost homeowners $369 more per month or $4,428 more per year.

The post-COVID return to CBD offices continues across Australia, with the average office occupancy rate climbing to 76 percent of pre-pandemic levels in the first quarter of 2024, according to new CBRE figures. Workers are gradually responding to their employers’ requests to attend their offices more regularly to enable greater collaboration with workmates. The occupancy rate has risen from 70 percent in the December quarter and 67 percent 12 months ago.

Occupancy rates improved across all capital cities during the March quarter, with Perth and Adelaide maintaining the strongest rates of 93 percent and 88 percent respectively. CBRE analysis suggests shorter commuting times and less structured working-from-home arrangements in these cities have contributed to higher rates of return. Brisbane’s occupancy rate is 86 percent of pre-COVID levels, weighed down by a slower return within the public sector, which represents 35 percent of the city’s office space. This same trend is being seen in Canberra, where the occupancy rate is just 66 percent.

In Sydney, the occupancy rate has risen to 77 percent, largely due to major banks and professional services firms pushing for more staff to return to the office this year. There has been a significant increase in workers returning to offices in Melbourne, with the occupancy rate up from 57 percent last quarter to 62 percent now. However, this is still the lowest attendance rate in the capital cities.

Businesses are increasingly pushing workers to return to the office because they are concerned working from home over multiple years will have a negative long-term impact on company-wide productivity. Part of the problem is new employees not having regular access to senior staff so they can learn and work more effectively and productively. CBRE says lower levels of collaboration and interaction reduce innovation, which is a particular concern for technology firms. They were quick to embrace remote working during COVID, but are now seeing dampened creativity among staff.

Tuesday is the peak day for attendance at CBD offices and Friday is the lowest day. Two-thirds of organisations that have moved their corporate headquarters since COVID have chosen to upgrade to premium office buildings, according to CBRE’s research. Premium blocks typically feature retail, restaurants, and recreational amenities on the ground floor, and command a higher rent. Companies are deciding it’s worth the cost to entice workers backand keep them feeling happy and engaged.

Jenny Liu, Director of Workplace Consulting at CBRE, said a vibrant workplace experience is essential.

“A workplace experience isn’t just environment, cool furniture and tech anymore,” she said. “It’s the culture, ways of working, leadership, and how vibrancy is created.”

Some companies are using apps that inform staff who will be in the office tomorrow. CBRE Research Manager Thomas Biglands said:

“It’s important that you achieve a critical mass of visitation so that employees come in and feel as though the office is vibrant and full,” he said.

Some firms are linking salary and promotions to office attendance to reward those workers providing higher contributions to corporate culture and mentoring younger staff.

The rate of return to offices in Australia is much higher than in the United States, where occupancy rates have remained at about 50 percent over the past year. CBRE analysis suggests this may be due to better public transport, shorter commutes and lower inner-city crime rates in Australia.

Nation’s Experts Split On Cash Rate Rise

A survey of economists unsure of rate rise before the end of 2022.

Companies are leasing premium office space to entice workers back, but employees in one major capital are holding out