RBA Expected to Hike Rates Amid Construction Boom

The Reserve Bank of Australia (RBA) is facing a challenging decision on monetary policy due to strong construction growth, which has some experts predicting a rate hike. According to Rabobank's analysis, building approvals have reached record GDP shares and are expected to continue growing. This trend is reminiscent of past oil shocks and inflation spikes, which the RBA will need to consider when making its decision.

The Australian Financial Review notes that the RBA faces a 'rates squeeze' as construction grows at its fastest pace in 60 years, with data centres driving this growth more than housing. Rabobank's Ben Picton expects a 25 basis point hike to take the official cash rate to 4.60%, which would support the Australian Dollar.