Interest rates are facing a sharper and steeper rise due to the inflationary boom which is pushing up price price pressures, new rate predictions show.
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Westpac's latest outlook for the monetary policy has signaled an earlier and faster jump in the cash rate, with economists at the nation's second largest bank touting a hike as early as June.
The bank's chief economist Bill Evans in his update released on Thursday, flagged the Reserve Bank of Australia will move interest rates to 1.25 per cent by the end of the year and further inflate its settings to 2 per cent by June 2023.
"We expect a much shorter tightening cycle with consecutive rate hikes in June, July and August," Mr Evans said in his update.
"That point would see the 2020 COVID emergency cuts unwound with the board likely to take a pause in September.
"Further hikes are now expected in October and November reaching 1.25 per cent by year's end."
A faster and steeper rate hike will have consequences for the cost of existing loans which will see a rise in interest payable over the coming months.
The market has been speculating a sooner rather than later move due to surging inflationary pressures which has surpassed the RBA's target range of 2 to 3 per cent.
Calculations conducted by RateCity show a $750,000 mortgage would see monthly repayments jump 22 per cent at the peak of Westpac's forecast, or an additional $763.
By the end of this year that payment rises 13 per cent or $456 a month on the same loan.
National Australia Bank and ANZ have also revised a faster rate hike following the federal budget, which a number of economists believe cash payments would further stimulate an already booming economy.
Mr Evans said the RBA is likely to risk being in political hot water about how much influence the budget has had in accelerating its decision to move on rates.
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"By establishing a clear expectation that the Board will now begin the tightening cycle in June, the RBA is willing to risk political controversy, particularly around any potential discussion of the role of the federal budget in changing the Board's stance," he said.
Inflation had been building before the oil shock sparked by the Ukraine crisis, in part of material constraints driving supply shortages across a number of industries and sectors.
This particularly has been felt in the construction industry where low housing stock and an inability to build quicker from a lack of supplies and labour has pushed prices upwards.
Labor Finance spokeswoman Katy Gallagher said rising rates would put pressure on households, claiming more needs to be done in rising wages for low income earners.
"The fact that wages have been stagnant is a reason why people are finding these cost of living pressures almost impossible to deal with," she said.
Latest data from the Australian Bureau of Statistics shows dwelling approvals in February jumped 43.5 per cent compared to the prior month.
New residential dwelling approvals were mostly seen in New South Wales, Victoria and Western Australia.
Westpac also upgraded its unemployment rate forecasts, expecting it to fall to 3.25 per cent. Wages are expected to grow 4 per cent over 2023.
