RBA Set to Hike Rates Amid Worst Housing Downturn in Generation

Australia's housing market is facing its worst downturn in a generation as the Reserve Bank of Australia (RBA) prepares to hike interest rates for a fourth time. The RBA is expected to lift the cash rate to a 15-year high of 4.6% next Tuesday, according to market participants and nearly all economists polled by Reuters.

Unlike in previous downturns, when the RBA would cut rates to boost economic demand, this time it's raising them to combat high inflation. The central bank is citing global events such as the US-Israeli war on Iran and a data centre boom as key drivers of inflation, which are unlikely to be sensitive to interest rate changes.

While many Australians are struggling financially, the labour market remains resilient, supporting incomes and allowing households to spend on luxury items like electric vehicles. However, economists warn that higher rates will not bring immediate relief for households, with some predicting a 10% peak-to-trough fall in housing prices, the biggest in three decades.