RBA Rate Rise Predicted to be First of Many: Economist Warns of Higher Interest Rates

A leading economist is warning that a rate rise on Tuesday could be the first of many, with interest rates potentially reaching over five per cent due to rampant government spending.

All four major banks have predicted the RBA will raise interest rates this week after RBA Governor Michele Bullock flagged that the jobs market was putting upward pressure on inflation.

The possibility of a 0.25-point rate increase would add about $1,500 per year to repayments for someone with an average mortgage of around $730,000.

EQ Economics' managing director Warren Hogan said he did not see 'any alternative' to raising the cash rate on Tuesday, predicting it will hit a new high for this cycle at 4.6 per cent.

'That'll be a 25-point increase,' he said. 'There's a very strong case to be made for going 40' - pushing rates up by 40 basis points to 4.75 per cent, which would make an increase to five per cent justifiable.