Next Reserve Bank rate change will almost certainly be upwards

From everything I am seeing in the Financial Review and the business section of the Australian, the next change in the Reserve Bank cash rate will be upwards. This being the case then the remaining two questions are: by how much will the rate be lifted; and how often will future rate rises be paced?

The general view of the experts seems to be that the reserve would like to get the rate back to around the 3 percent mark; which is double what it is now. And they would like to get back to this level by the start of FY20—which is mid-2019.

Increasing the cash rate to 3 percent would push the market rate for house mortgages up to around 5.5 to 6 percent.

So, the remaining question is: how will they pace the required increases?

Firstly, and this is purely just my input, they have to decide if the first increase happens before or after Xmas. There are upsides and downsides to both options. One of the aims of increasing the interest rate is to try and stop people from going further into debt because Australia's household debt is skyrocketing and out of control. From this viewpoint they would like to increase the interest rate before Xmas—in order to calm down Xmas spending and any further increase in household debt. On the other hand, they do want people to spend at Xmas in order to help the ailing economy. So it is a difficult decision to make.

I think they will do a small increase before Xmas. Possibly not enough to stop people spending at Xmas but enough to get the rate hike started. My money is on a 20 basis point increase (i.e., 1/5th of a percent) before Xmas.

I will be sure to let you know if I was right :-)