- Aussies set for financial pain in wake of tight Budget
- Economists believe Reserve Bank will life interest rate
- "Inflation figures are bad news for mortgage holders"
A FINANCIAL double-hit is destined to drain the pockets of struggling homeowners - a June interest rate rise just weeks after a penny-pinching Federal Budget.
And it all comes as living costs soar to new heights.
Economists now believe the Reserve Bank will be forced to lift its official interest rates when its board meets next month, stirred into action earlier than expected because of runaway inflation.
Having kept rates on hold since November, the RBA released a surprisingly hawkish report on the state of the economy yesterday, highlighting the need to lift its inflation forecasts for the next two years. It now expects underlying inflation - the best measure of the cost of living - to punch through the dangerous 3 per cent level by Christmas, one year earlier than it had predicted only two months ago.
The dire situation puts the Reserve Bank in a difficult and quite ironic position.