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Markets wrap: RBA announces 50bps rate hike to 2.35%, as predicted by experts

Update: As expected, the RBA has raised interest rates by another 50 basis points. The cash rate is now lifted from 1.85% to 2.35%, the steepest hike since 1994, when the RBA lifted the cash rate from 4.75% to 7.5% in just five months.

Research from Finder revealed that 97% of experts predicted another cash rate rise. Data from IAB indicates a slowdown in the growth of the digital ad market after a stellar H1 fuelled by the election and Olympics.

The RBA announced it’s committed to returning inflation to 2-3%, to keep the economy at an even keel. Inflation is currently at 6.1%, notably ahead of wages.

Graham Cooke, head of consumer research at Finder, spoke to Mumbrella after the announcement, noting that many senior economists predict this’ll be the RBA’s final hike this year, and that it’s unlikely the RBA will go for a sixth consecutive hike.

Graham Cooke, Head of Consumer Research at Finder.

“There’s only so many times you can increase the pressure before you have to stand back and reassess. It’s probably a little bit arbitrary as to which hike will be the last one, but I think the economists were saying ‘this is enough of a shift for us to see measurable changes in the economy’,” Cooke said.

“It’s going to add nearly $10,000 more to the average home loan, so massive impact on families.

“It’s a mortgage time bomb we’re looking at for many borrowers. It’s an uncertain time for everybody. Nearly 76% of economists were positive that wage growth would follow, however.”

On the impact the hikes would have on the media industry and ad budgets, Cooke said: “$10,00 extra on our home loan, means $10,000 less to spend, which is the discretionary spending a lot of advertisers and streaming companies are trying to target. Consumers are definitely going to have less to spend, which may result in reducing spending on advertising, which is what the RBA’s looking for in general to pull back inflation within the boundaries of something more reasonable.”

RBA Governor Philip Lowe’s announcement followed in the footsteps of Fed Chairman Jerome Powell, with his 2:30pm (AEST) board meeting in Martin Place today, inspiring murmurs of dread amongst investors, homeowners and everyday Australians grappling with the heightened cost of living.

RBA Governor Philip Lowe is set to announce the latest update on interest rates at Martin Place this afternoon.

Since May, the RBA has consistently introduced a 50 basis point increase each month – an a 50bps increase today brings the cash rate from 1.85% to 2.35%, its highest level since 2015.

Analysts and economists at major banks unanimously foresaw yet another 50bps increase in its efforts to curb inflation.

“ABS data shows the labour market is continuing to tighten, and inflation remains high, so I expect to see another cash rate rise in September,” said Anthony Waldron, CEO of Mortgage Choice.

“Inflation is still rising in Australia, fuelled by demand-driven and supply-side disruption shocks, which have a high possibility of pushing inflation beyond 7% by the end of this year,” said Dr Mala Raghavan, head of economics at University of Tasmania.

Commonwealth Bank’s head of Australian economics, Gareth Aird, said rate rises take around three months to affect the cash flow of Australian customers and homeowners – meaning consumers are still responding to the hikes from May and June this year.

Sarah Hunter, partner and senior economist at KPMG said: “Although the drop in employment in July (albeit from a very strong increase in June) suggests that growth momentum is now easing, activity levels are still very high in absolute terms. The economy is testing the limits of its supply side capacity, and in this environment, inflationary pressures remain elevated. The RBA will be conscious of the need for further increases in the cash rate to tame these pressures, and an increase of at least 25 bps is a near certainty; the Board could choose to increase by 40 bps (to return the cash rate to its pre-COVID increments), but a 50bps increase looks marginally more likely.”

In ad news, a report commissioned by IAB and PwC found that local Australian online advertising market recorded a 22% increase year-on-year to reach $13.9 billion for the financial year ending 30th June 2022.

While all categories of digital ad spend recorded double digit growth year-on-year, softened growth is expected following the bolstering influence of the Federal Election and Olympics in H1 this year.

Read on for a wrap of notable movements in media and marketing companies:

oOh!media:

  • Strong results for OOH provider oOh!media spell a positive future for the advertising format, which reported a 10% increase in revenue in its recent earnings.
  • oOh!media launched 378 digital sites over the year, making strong headway in their goal to expand the DOOH format across the country in H2.
  • The day the earnings report was released – August 22nd – the OML share price spiked to 1.44 AUD.
  • The stock has since dropped down and stabilised to 1.33 AUD, still notably higher than the price seen in May-July.
  • oOh!media’s market capitalisation currently sits at $799.19 million.

Nine Entertainment Co.:

  • An announcement of the winner of the AFL rights is anticipated this week, with the bidding war shaken up by Nine reportedly throwing in a last-minute $500 million a year offer for the broadcast rights on Monday.
  • The other players in the bidding war – Seven, Foxtel and Paramount, owner of Network Ten, have declined to provide any public comments in the media on the matter.
  • Nine’s recent strong financial results may have emboldened them to submit the sizeable bid, reporting revenue of $2.7 billion for FY22.
  • NEC shares currently trade at 2.18 AUD on the ASX – a steady, but not drastic incline since the release of their financial results on August 25th.
  • NEC’s market capitalisation is currently $3.70 billion.

Meta:

  • Facebook and Instagram parent company Meta has been fined €405m ($590 million AUD) by the Irish data watchdog for mishandling the data of teenage users.
  • The Data Protection Commission issued the penalty after a two-year long investigation into Meta’s breaches of the European Union’s GDPR. The breach consisted of setting accounts of users between ages 13-17 to ‘public’ by default and letting teenagers set up accounts that publicly displayed their phone numbers and email addresses.
  • Meta’s share price has fallen by 3.05% today.
  • META shares currently trade at 160.32 USD.
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