Interest rates could be devastatingly high due to financial struggles faced by common households.

In less than two weeks, the Reserve Bank will convene to make a decision on interest rates. As the anticipation builds, one economist, Warren Hogan, has already predicted that we can expect further increases. This news may come as a devastating blow to many mortgage holders across the country.

During an interview on Today, Hogan, who serves as the chief economic adviser for Judo Bank, explained his prediction. He believes that the current strong state of the economy will prompt the need for more rate hikes. This, in turn, will help combat the cost of living crisis and bring inflation down. However, he acknowledges that this may not be welcome news for those with mortgages.

Hogan also mentions the possibility of reaching a similar level of interest rates to other economies around the world, which could help curb inflation. He notes that there is pressure in various sectors of the economy and that not taking action could lead to inflation spiraling out of control, as seen in the late 1980s when rates reached 17.5%.

While Hogan does not foresee the need for such drastic measures this time around, he stresses the importance of keeping interest rates at the right level to avoid a recession. He warns against rates reaching six or seven percent, which could have damaging effects on the economy. Ultimately, the goal is to mitigate the risk of inflation and provide relief to those feeling the strain of the cost of living.

Hogan also discusses the role of the government in this situation, urging them to remain disciplined in their upcoming budget and not resort to throwing money at the economy. He acknowledges the positive aspects of a strong economy, such as record-low unemployment rates and job creation, but emphasizes the need to address the pressure on inflation and the cost of living.

As we approach the Reserve Bank's next meeting, Hogan believes that they will not make any changes just yet. However, he cautions that there is a possibility for one or two more rate hikes in the near future if the economy remains strong. It is crucial for the government and the RBA to work together in finding a balance that will benefit the economy as a whole.

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