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The Reserve Bank of Australia (RBA) is expected to hike interest rates when it meets next week for the first time this year.

The predictions come off the back of stronger-than-expected jobs data and stubborn inflation.

Here’s what you need to know.

Context

The RBA is Australia’s central bank. It meets eight times a year to adjust the cash rate to keep inflation in check and unemployment low.

The cash rate is what the RBA charges banks for short-term loans. We usually refer to changes in the cash rate as the RBA changing interest rates, because the cash rate affects interest rates across the economy, including home loans.

At their last meeting in early December, the RBA kept interest rates on hold at 3.6%. 

That was the fourth time in a row the RBA had kept the rate unchanged.

Inflation

The RBA partly bases its decision on inflation – this is because the cash rate is the main tool the RBA has to fight high inflation.

While the latest inflation data won’t be released until later today, it is expected to remain above the RBA’s target band of 2-3%.

In November, inflation was at 3.4%, down from 3.8% in October. 

Jobs data

The RBA also looks at the unemployment rate, which measures the percentage of people who looked for work and couldn’t find any. Last week, a better-than-expected jobs report showed the unemployment rate fell to a seven-month low of 4.1% in December. 

While the RBA tries to keep unemployment low, when the labour market is too tight, it can lead to higher inflation as workers can demand higher wages.

What to look out for

The RBA’s decision will be made public next Tuesday (3 February) via press release at 2:30pm. 

If the RBA does raise interest rates, it will be one of the first major central banks to do so in the post-pandemic world. 

Reporting by Lachlan Keller.

Australia’s generational wealth divide is changing, as Gen X now holds more wealth in property and shares than Baby Boomers, according to new analysis from global accounting firm KPMG.

This is an acceleration of the ‘great wealth transfer’ in Australia – a socioeconomic trend where older generations hand over the wealth they’ve accrued to younger generations. 

Baby Boomers are expected to transfer $3.5 trillion to their children and grandchildren by 2050. 

Analysts at KPMG examined recent Australian Bureau of Statistics (ABS) data to compare household wealth across generations. 

They looked at various asset types and debts across generations to see the total value, and find out where each generation held their wealth. 

Baby Boomers (1946-64), Gen X (1965-80) and Millennials (1981-96) were the focus of the report.

Gen Z (1997-2010) was not included, likely because most are yet to enter the property market. 

The report found that Gen X now hold the most wealth in property out of all generations, with an average value of $1.445 million, compared with the Boomers’ $1.36 million.

Boomers remain the wealthiest overall, however, with an average net worth of $2.4 million compared to Gen X’s $2.2 million. The difference mainly lay in savings and superannuation, as Boomers begin to downsize in retirement. 

Both own significantly more than Millennials, who hold $890,000 in property on average, and have an average net worth of $900,000. 

Along with the lowest net worth, Millennials were also found to hold the largest debt — nearing an average of half a million dollars, meaning their debt levels were equal to roughly half their entire net worth.

Meanwhile, despite both owning more property value, Gen X’s and Baby Boomers’ debt levels were only 20% and 6% of their total net worth, respectively.

The report said there had been some property market respite at the height of the pandemic for younger people, with ultra-low interest rates allowing some to get their foot on the ladder. 

This pushed the average household wealth for Australians aged 25-34 up more than 60% from 2019/20 to 2024/25, more than any other generation.

However, as interest rates look to rise again, those who missed that window of opportunity are now at risk of being priced out of the market, analysts suggested. 

KPMG Urban Economist Terry Rawnsley said the report highlights the importance of property for wealth creation in Australia, noting that for younger people it will be a “much tougher task” to match older generations. 

A December KPMG report found just over one in ten homes for sale in Australia are affordable to the average first home buyer. 

The KPMG report follows findings from the Organisation for Economic Co-operation and Development (OECD), which advised Australia to adopt ambitious social housing targets to combat inequality. 

In its annual survey of Australia released last week, the OECD said strained housing affordability was a drag on economic growth and called on all levels of government to boost housing supply.

Others have criticised the Federal Government’s 5% deposit scheme for first home buyers, suggesting it will have the effect of raising prices, contributing to demand while failing to address the supply shortage. 

Reporting by Lachlan Keller.

Why investing early can pay off:

The sooner you start investing, the more time your money has to grow. That’s the power of compounding – you can reinvest dividends to potentially increase your returns over time.

Investing can also help your money keep pace with inflation, which savings alone may not. By diversifying, staying consistent (instead of timing the market), and reinvesting dividends, you give yourself a better shot at growing wealth long term.

Listen to Episode Two in Season 1 of the CommSec Invest podcast to find out more.

_{‘Information is general in nature. Consider the T&Cs and other fees and charges at commsec.com.au before making a decision. Investing carries risk.’}

This week, The Washington Post (owned by Amazon founder Jeff Bezos) cancelled its plans to send a contingent of journalists to the Winter Olympics, which starts in a couple of weeks. Then they (semi) un-cancelled them.

Initially, an email was sent to journalists announcing that no one would be going. It was a surprise move, particularly given the publisher had already paid for many of the expenses involved in sending a group to cover the competition.

But once it was announced, and backlash ensued, they backflipped on the decision, with four journalists from the publication now set to attend, according to The New York Times. (Yes, this is very meta of us to be a media company reporting on a media company reporting on a media company.)

It comes amid job cuts and revenue issues for The Washington Post in recent years. Watch this space.