A shadow board of economists recommends on Melbourne Cup Day to rein in inflation that's still well above target.
The Reserve Bank of Australia (RBA) is heading into a live interest rate call on Tuesday following and signs of resilience in the jobs market.
Consumer and business confidence levels remain stubbornly low and there are other signs of weakness peeking through, even while the 12 interest rate increase so far continues to work its way through the economy.
Why are rates likely to rise?
The shadow board of economists at the Australian National University is recommending a 25 basis point increase to the cash rate in November.
The group has attached a 62 per cent probability to a further lift to the cash rate and a 37 per cent chance it should hold steady at 4.1 per cent for another month.
Underlying inflation has emerged as a key source of concern.
The trimmed mean - the RBA's preferred measure of underlying inflation - grew 5.2 per cent year on year, still well above .
The latest set of labour force data also pointed to strength, albeit with gradual signs of softening around the edges.
"But business confidence is softening further and the global economy, while surprising on the upside, faces considerable challenges, especially geopolitical," the ANU shadow board said.
What do the big four banks predict?
Economists from all of the big four banks are predicting a 25 basis point increase to 4.35 per cent, and a survey of 45 experts by comparison site Finder found 69 per cent were leaning towards more tightening.
A 25 basis point hike, if it eventuates, would add an extra $84 to monthly repayments for a $500,000 loan over 30 years.
The big four banks currently all predict that rates will peak at 4.35 per cent in November.
Westpac forecasts they will fall to 2.85 per cent December 2025, while Commonwealth Bank predicts they will fall to that rate by May of that year.
NAB predicts they will drop to 3.10 per cent by March 2025, and ANZ to 3.35 per cent in June 2025.
Consumer prices rose 1.2 per cent over the three months to September, making a 5.4 per cent increase over the past 12 months. Source: SBS News
Mortgage holders struggling to make extra repayments
Research by comparison site Canstar also shows the rising cost of living and higher interest rates are stopping many borrowers from making extra repayments that save on interest over time and allow households to pay off their loans sooner.
A survey of 752 mortgage holders found 45 per cent were not making extra repayments, though 38 per cent were still managing to stump up the extra funds each month.
Canstar finance expert Steve Mickenbecker said the true cost of interest rate rises were yet to be felt.
"Making extra loan repayments not only reduces the long-term cost of the loan but also cuts the period of time that borrowers are indebted to the bank and making repayments," Mickenbecker said.
Deputy Opposition leader Sussan Ley said another rate rise would hit Australian families hard ahead of the festive season and that the government had "missed their opportunity to kill inflation".
"It is now widely accepted by economists that Australia's inflation challenge is homegrown and that is why rates will have to go up again," she said.
Treasurer Jim Chalmers said inflation was driven by pressures outside of the government's control.
"Decisions taken on the other side of the world by the oil producing nations to wind back on supply, that meant that we had a spike in the petrol price – and there's no use pretending otherwise," he said on Sunday.
Jim Chalmers denies he's exerting pressure on the RBA by highlighting softening economic conditions. Asked if he had been 'jaw-boning' the RBA by highlighting softening economic conditions, Chalmers denied the allegation, saying they were fuelled by "bizarre logic".
"The treasurer of Australia is not allowed to comment on the treasury's forecasts for inflation on the day inflation figures come out?" he told ABC Television.
"I mean, that is plainly and frankly ridiculous."
