The Reserve Bank is now almost universally expected to raise interest rates again after its deputy Andrew Hauser warned it would not tolerate inflation remaining above target for a prolonged period.

“A consequence of that is that inflation has been above target for a long period of time and at some point, we will have to say that is long enough,” he told the ABC’s 7.30 program on Tuesday night.

July’s annual headline inflation pace of 3.5 per cent marked the 12th straight month of the consumer price index being above the RBA’s 2-3 per cent target.

The Reserve Bank isn’t expecting it to get back within the band until June next year, which would be almost two years of the consumer price index being out of control.

“So, the reason for taking time is not over the horizon, but it’s long, I do agree,” Mr Hauser said.

The big four banks and most economists are expecting another hike either later this month or on Melbourne Cup day, with the RBA’s former economic research manager John Simon noting Federal Government spending was worsening an already bad inflation situation.

“They are certainly contributing to aggregate demand and if we really want to get on top of inflation sustainably, the Government needs to close the deficit,” he told The Nightly.

“They can do it by raising taxes or lowering spending.

“Inflation can be solved by the RBA - the question of how painful it is something the Government has control over - if the Government cuts its spending, then interest rates don’t need to rise nearly as high.”

One more interest rate rise would take the cash rate to a 15-year high of 4.6 per cent but another on top of that would take it to 4.85 per cent, which would be the highest level since the global financial crisis in 2008.

Australian Government spending is forecast by Treasury to make up 26.8 per cent of gross domestic product this financial year, with a $31.5 billion deficit, which would be the highest in four decades outside of COVID.

More rate increases could see the Reserve Bank simultaneously fail its dual mandates on controlling inflation and keeping unemployment under 4.6 per cent, even if this doesn’t spark a recession like in 1991.

But the Housing Industry Association’s chief economist Tim Reardon said falling house prices would see homeowners cut back on their spending, which made any more Reserve Bank rate hikes unnecessary.

“It’s unnecessary to increase interest rates while house prices are declining,” he said.

“The Reserve Bank have increased interest rates: we’re seeing home prices come off; that leads to what economists know as an adverse wealth effect and it will see, with time, we’ll see aggregate demand slow.

“The lag between an increase in the cash rate or a reduction in inflation, usually takes 12 to 18 months.”

Macquarie chief economist Ric Deverell on Wednesday became the latest to predict another RBA hike on September 29, following its next two-day meeting, which would take the cash rate to a 15-year high of 4.6 per cent, putting him on the same page as NAB.

“In the first half of 2025, it looked like the experiment had worked, with underlying inflation returning to the middle of the target band, allowing the RBA to claim victory by easing policy by 75 basis points,” he said.

“However, over the second half of 2025 both growth and inflation rebounded, forcing a reversal of the earlier cuts as the RBA acted to slow growth.”

Ray White chief economist Nerida Conisbee said the uncertainty about when rates were likely to rise again would have implications for economic activity and the property market, given consumer sentiment is at weak levels.

“The uncertainty is creating an environment where both buyers and sellers are watching and waiting,” she said.

“I would imagine other parts of the economy are being similarly impacted by the uncertainty.”

Westpac on Tuesday became the last of the big four banks to predicting another hike in 2026 but on November 3, shortly before the Melbourne Cup, putting it in line with the Commonwealth Bank, ANZ and AMP.

The futures market sees a hike being the next move as a 66 per cent chance, but with that increase occurring in November instead of September.

While the major banks still see rate cuts in 2027, the market sees only another hike that would take the RBA cash rate to 4.85 per cent, or the highest level since late 2008.

Just one more rise would take the RBA cash rate to 4.6 per cent and be at the highest level since November 2011, adding $121 to monthly repayments on an average, new mortgage of $731,000.

The Reserve Bank’s three hikes in February, March and May have already added $354 to monthly repayments and another hike would mean borrowers with a new loan would be paying $475 more than they did at the start of this year.

That would add up to $5700 more a year in mortgage servicing costs, compared with early 2026.

But two more hikes would add $243 to monthly repayments, equating to $2916 over a year.

A total of five hikes in 2026 would see borrowers paying $7164 more a year servicing their home loan than they did at the start of this year, given the $597 increase in monthly repayments.

Suffering home borrowers aren’t the only ones paying more, with the Federal and State governments also paying higher annual interest bills as government bond yields soar.

The 10-year Australian Treasury yield of 5.2 per cent is already at the highest level since July 2011 when the RBA cash rate was at 4.75 per cent, but this year, gross Commonwealth Government debt has climbed above $1 trillion.