THE SQUIZ
Get ready for a post-holidays wake-up call next week when the Reserve Bank (RBA) makes its first interest rate announcement for 2023. After a 2 month hiatus, economists are predicting a 0.25% increase on Tuesday – making it the 9th consecutive hike – taking the cash rate to 3.35%. And it’s unlikely to be the last of it, with Deutsche Bank predicting 4 impending rate rises, taking the cash rate to 4.1% by August, costing those with a $500,000 mortgage an extra $300 per month on what they’re paying now. And it will be a shock for the 20% of people who locked in super low rates during the pandemic – they will see their fixed-term rates end this year, so their finances could get a lot tighter.

WHY ARE RATES STILL CLIMBING?
First and foremost, it’s about inflation remaining high. Last week, new official figures revealed that inflation hit 7.8% in 2022 – the highest since the dark economic days of 1990. But there is one sign that last year’s interest rate hikes are doing their job… New retail sales data out yesterday showed a fall of 3.9% in December compared to the previous month. It’s the first drop in almost a year, suggesting Aussies are finally starting to rein in their spending. But… sales at the shops were still 7.5% higher than in December 2021, so the experts say the latest info is unlikely to stop the RBA from lifting rates again. And then there’s the housing market to consider… New data from CoreLogic shows while home prices fell in every capital city in January, the prices across the country remain above pre-pandemic levels.

WHAT ABOUT THE REST OF THE WORLD?
Actually, it’s a rosier picture than when we wrapped things up last year… The International Monetary Fund (aka the United Nations’ big financial institution) upgraded its global growth forecast for 2023 from 2.7% to 2.9%. It’s still down on the 3.4% growth recorded in 2022, but it’s better than expected thanks to “surprisingly resilient” demand in the US and Europe, an easing of energy prices, and China’s economy reopening after ending strict COVID restrictions. IMF boss Pierre-Olivier Gourinchas says it could mark a “turning point” for a better 2024. But before we break out the Champagne, he’s warned that Oz’s battle against inflation is “far from won” and that easing off rate rises too soon could undo the work done so far. Onwards, and most likely upwards…