Petrol back below $2 for some motorists

·3-min read

As borrowers brace for another interest rate rise from the Reserve Bank of Australia, there was at least some modest relief for households with the national price for petrol easing after six weeks of consecutive increases.

The Australian Institute for Petroleum said the national average petrol price was down 3.1 cents in the past week to 196.9 cents per litre.

However, Western Australia, the Northern Territory and Tasmania all saw price gains, leaving petrol there above $2 per litre at the bowser.

Commonwealth Securities chief economist Craig James warned motorists not to get too comfortable, with global oil prices on the rise again and wholesale petrol prices already near 190 cents a litre.

"Expect prices to jump in the next few days as high as 225 cents a litre," Mr James said.

The RBA is already expecting the inflation rate to hit six per cent by the end of the year after a spike to a more than two-decade high of 5.1 per cent in the March quarter, a long way from its two to three per cent target.

As such, economists expect the RBA to follow-up on its 25 basis point cash rate hike in May with a further increase of as much as 50 basis points when its board meets on Tuesday.

The RBA has warned further increases can be expected in the months ahead, which economists believe could eventually see the cash rate top two per cent.

Financial comparison site Finder says the impact on variable home loan rates from a rise in the cash rate to 0.75 per cent from 0.35 per cent, as some economists are predicting, would add a further $125 to the monthly repayments on a $600,000 loan or $1500 over a year.

At a cash rate peak of 2.5 per cent, repayments will increase by $716 a month compared to now or $8592 over a year.

Recent research by the Commonwealth Bank of Australia found the vast majority of home owners have been preparing for higher interest rates, even before the RBA pulled the trigger in May.

It also found that in preparation a third were looking to switch to cheaper providers for utilities and services to help manage costs.

CBA, the nation's biggest home lender, has jumped on the findings and is offering pre-approved home loan customers a free NBN plan for three years.

The offer, in partnership with telecom provider More, would save eligible home buyers over $2700.

CBA - which has already indicated it won't be cutting its margins any further to compete in the home lending market - is also offering all of its existing customers 30 per cent off More NBN plans for the first 12 months when they sign up using their credit or debit card as their bill payment method.

Another factor in the RBA's deliberations will be the state of the labour market and what that might mean for wages growth and inflation down the track.

While job advertising appears to be stabilising after a spike earlier in the year, it still indicates there is strong demand for workers, even as the jobless rate sinks to it lowest level in nearly 50 years at 3.9 per cent.

The ANZ job series rose 0.4 per cent in May to 238,178 after a downward revised two per cent fall in April, but was still 17.3 per cent higher than a year earlier.

"It remains close to the March peak, indicating significant unmet demand for labour," ANZ senior economist Catherine Birch said.

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