Higher for longer: why low rates are relics of the past

Key points

• The Reserve Bank of Australia says interest rates will likely remain higher for longer due to rising neutral rates driven by global competition for capital. Christopher Kent, the RBA's assistant governor for financial markets, noted that neutral rates are increasing both in Australia and abroad.
• Markets expect the cash rate to stay above 4.5 per cent until at least mid-2028, the longest period since before the global financial crisis.
• Commonwealth Bank chief economist Luke Yeaman warned that government spending could undermine the RBA's efforts to control inflation.