Markets see ‘stronger for longer’ interest rates


IFM chief economist, Alex Joiner, has published an interesting chart on Twitter (X) showing how financial markets have dramatically ramped-up their RBA official cash rate (OCR) projections from mid-year:

RBA forecast cash rate

Source: Alex Joiner (IFM Investors)

The forecasts, should they come to fruition, are obviously terrible news for Australian mortgage holders, who were already paying a record share of their incomes on debt repayments before last week’s 0.25% OCR hike:

Housing debt servicing costs

Instead of seeing interest rates fall next year, markets are instead tipping a high plateau in rates until 2026.

The Albanese government has more tools at its disposal than the RBA and needs to help it lower inflation.

It should start by slashing net overseas migration from its current record level of 500,000 a year to a level that is below the nation’s ability to supply houses, infrastructure and business investment.

Historical NOM

Otherwise, population demand will continue to swamp the supply-side of the economy, resulting in lower productivity, higher inflation, and higher interest rates for longer.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.