RBA Set to Hike Interest Rates Amid Inflation Worries

The Reserve Bank of Australia is set to raise interest rates for the fourth time in two years, despite a budget bright spot. Economists are warning mortgage holders to prepare for another rate hike, with borrowing costs expected to increase to 4.6%, their highest level in 15 years.

Deputy Prime Minister Richard Marles attributes inflation to conflict in the Middle East, but opposition frontbencher James Paterson blames government spending at stimulus levels. Median property prices have dropped 3.6% since March's peak, and auction clearance rates slumped to a 10-week low on Sunday.

The budget is expected to deliver a pleasing report card for the government, with the deficit coming in billions of dollars better than forecast. However, the actual outcomes are still worse than the previous year's final budget outcome, which put the deficit at just under $10 billion for 2024/25.