Economists seek rate hints in RBA minutes
Economists will be looking for further hints on the interest rate outlook when the Reserve Bank of Australia releases the minutes of its May board meeting.
The RBA board endorsed a lift in the cash rate to 0.35 per cent from a record low 0.1 per cent at that meeting, the first increase in over a decade.
It came much earlier than the RBA had earlier indicated, but it couldn't ignore the spike in the inflation rate to 5.1 per cent - the highest level since the introduction of the goods and services tax in 2020/21.
In its recent quarterly statement on monetary policy the RBA predicted inflation would now rise to six per cent by the end of this year, while indicating it will do whatever it takes to return inflation to the two to three per cent target.
"This will require a further lift in interest rates over the period ahead," the statement said.
At this stage, economists are expecting a further 0.25 percentage point increase in the cash rate at the RBA's June board meeting.
However, a bigger increase may be seen if Wednesday's wages data for the March quarter proves stronger than forecast.
Whatever the case, economists expect the cash rate could reach around 1.5 per cent by early next year.
Tuesday will also see the release of the weekly ANZ-Roy Morgan consumer confidence index, a guide to future household spending.
The index has fallen for four straight weeks, with confidence battered by cost of living pressures and now rising interest rates.
In particular, there has been a steep fall in confidence among people paying off their home loan with mortgage repayments set to increase by hundreds of dollars per month over the year ahead.
Adding to cost of living pressures has been a renewed rise in petrol prices against the backdrop of stubbornly high global oil prices and a weaker Australian dollar not helping import costs.
The Australian Institute of Petroleum's weekly report on Monday showed the national average for petrol prices rose by a further 5.4 cents to 185 cents per litre, the fourthÂ weekly increase in a row.
Commonwealth Securities chief economist Craig James said petrol is the single biggest weekly purchase for most families and is currently a major influence on consumer sentiment.
"Higher fuel prices, together with the recent rate hike, constitute a double whammy for Aussie families," he said.
"Retailers of discretionary goods and services are most at risk in the current environment."