rba

Australian consumers are showing real signs the largest and longest rate hiking cycle in 30 years is starting to bite. It might be the proof the RBA needs to see that its fight against inflation is working, adding further weight to the theory that rate rises are behind us.

The chief economist says rapidly falling inflation, high savings levels and a lack of excess are among the reasons this pivotal moment could pass without the major downturn that many have long dreaded. But AMP still puts recession odds at 50/50, and rate cuts will likely need to precede any growth rebound.

Rate hikes are causing anxiety for Australian mortgage holders, with new research showing seven out of 10 worry about missing repayments. As large numbers of fixed-rate mortgages expire, analysts say distressed property selling is likely to pick up from its thus-far benign levels.

Bill Evans, who will step down next year after three decades as Westpac’s chief economist, says “deeply pessimistic” consumer sentiment despite the RBA’s recent pause is a sign of further hikes ahead.

While markets expected a pause, the RBA board’s hawkish tone implying a further cut in August surprised many. For Australia’s property sector in particular, observers say the path to a soft landing may be getting even more treacherous.

While interest rate hikes can be painful, they are crucial tools in the fight against inflation, Integral Private Wealth’s David Simon writes. Anyone in doubt should consider the Zimbabwean hyperinflation crisis of the late 2000s and the perils of short-term fixes.

Five per cent on a one-year term deposit will tempt a lot of investors, and with good reason, but equities have proven their worth over the long term. As ever, experts say, personal needs should guide investment selection.

The RBA’s sharp policy shift towards higher rates has put significant wind in the tail of “boring, old” bonds. But do Australians understand the role they play in the fixed income spectrum, and what they can do for portfolios?

In a recent market update Sage lamented the RBA’s recent decision to re-engage interest rake hikes after pausing only a month earlier. Policy outcomes have become confusing, the fund manager noted, with the path to a soft landing becoming even narrower.

As the economy tilts toward recession, portfolio analysts are turning towards sectors and companies that handle cloudy conditions better than most. Healthcare, energy, consumer staples and utilities come into focus, while cyclical sector companies lose favour.