MNI BRIEF: Wage Hikes To Play Out 'A Bit further'-RBA's Kohler

Strong domestic wage growth is expected to continue over coming months, the Reserve Bank of Australia's head of economic analysis indicated Wednesday Speaking ahead of next week's release of its Statement on Monetary Policy, which will include revised economic forecasts, Marion Kohler, told a Senate select committee on the cost of living, said the peak of inflation was likely at the end of 2022 at around 8% and will begin to ease over the course of this year.

"Inflation is too high. High interest rates are needed for a more sustainable balance to help return it [to target], she said." The RBA is expected to hike rates 25bp when it meets on February 7. She suggested it was likely wage growth would continue to accelerate given the tight labour market.

Kohler was also pressed on the RBA's understanding of the impact on the mortgage market as a wave of fixed rates loans expire this year in an environment where rates have been raised 300bp since May. She said around one-third of outstanding housing credit is fixed rate and about half of that is due to roll off in the coming year. Kohler estimates those loans are worth about AUD350 billion. She said the number of loans set to roll over was in the "high 800,000'" range. Senator Dean Smith noted the parliamentary library had estimated 535,000 fixed rate loans would rollover in 2023, with a peak of 52,000 mortgages in June. An additional 141,000 were estimated to rollover in 2024.