(Bloomberg) -- Australia’s central bank will stand pat for a fourth straight meeting next week as past interest-rate increases gain greater traction, giving new Governor Michele Bullock scope to wait and assess.

Most economists expect the Reserve Bank will keep the cash rate at 4.1% on Tuesday, with the board looking through higher oil prices that interrupted a moderation in inflation. 

Bullock, in her first policy meeting as governor, will also be mindful that many Australian borrowers are being forced to switch to higher-rate loans as their pandemic-era low-cost fixed mortgages come up for renewal. 

“The Australian household is the most impacted by policy rates that it’s ever been,” said Robert Mead, co-head of Asia-Pacific portfolio management in Sydney for Pacific Investment Management Co. “That’s why policy is likely to get more traction here than in the US.”

Over 90% of new Australian home loans are on floating rates, compared with the US where a majority are fixed for 30 years. 

That means the effective mortgage rate has climbed to 5.6% from 2.75% in Australia compared with 3.6% from 3.3% in the US during the current tightening cycle, Westpac Banking Corp. calculations show.

The RBA has repeatedly stressed that a key economic uncertainty is how rising borrowing costs impact Australian households, which are the third most indebted in the developed world. 

That and the prevalence of floating rates are feeding expectations that Australia’s economy will be one of the earlier ones to crack at a time when the US is likely to experience a soft landing.

“Excess savings are being eroded incredibly quickly,” Mead said. “We’re in the epicenter of the switch to floating-rate mortgages from fixed-rate ones.”

Boosting the case for an RBA pause, data this week pointed to a potential turning point in the labor market with job vacancies tumbling nearly 9% in the three months to August. Retail sales for August also came in weaker-than-expected with consumer sentiment already in the doldrums.

“The upward surprise in inflation through August does put some upside risk on inflation in the third quarter as well as the rest of the year,” said Adelaide Timbrell, senior economist at ANZ Banking Group Ltd. 

Even so, “we don’t think the current inflationary pressure pulse, in general, will be enough for them to raise, particularly when they are already in restrictive territory.”

A key cushion for the A$2.3 trillion ($1.5 trillion) economy is surging population growth that’s boosting demand for everything from housing to transport and dining out. Historically, migration has allowed Australia to dodge recession.

Pimco’s Mead reckons Australia will experience a relatively shallow downturn. He remains positive on the nation’s bonds, partly because traders aren’t yet positioning for the sort of steep rate cuts favored for the US, UK and even Europe.

Economists in a Bloomberg survey see a 50% probability of an Australian recession — defined locally as two consecutive quarters of GDP contraction — over the next 12 months. 

Another topic on the RBA board’s agenda next week may be quantitative tightening — or actively selling bonds in the market that it bought as part of pandemic-era stimulus. 

Some strategists and economists are speculating the central bank will embark on such move later this year.

“The door is clearly open for the RBA to consider active QT,” said Prashant Newnaha, Singapore-based senior rates strategist at TD Securities. “Should the RBA consider active QT we expect it to telegraph quite clearly that the move is about balance sheet management and not an effort to tighten policy.”

©2023 Bloomberg L.P.