Last week, the Reserve Bank released its updated forecasts for the economy. It expects economic growth to slow from 2.7 per cent through 2022 to 1.6 per cent in 2023 and 2024.

Rynne said if the RBA pushed ahead with three more interest rate rises over the next six months, households – which account for about 60 per cent of all economic activity – would spend $20 billion less this year. That would wipe a full percentage point from economic growth.

“It would not be unreasonable to expect household consumption expenditure to be around $20 billion lower over this year as a direct consequence of the monetary policy tightening, with 1 per cent being shaved off GDP,” he said.

“It would seem the RBA’s forecasts are optimistic and once the effects of higher interest rates flowing through to higher rents and the full impacts of real wage losses are factored in, then the slowdown in economic activity over the coming year is likely to be even more acute than even these updated forecasts by the RBA suggest.”

AMP Capital chief economist Shane Oliver said he was increasingly concerned the RBA was lifting interest rates too far and not paying enough attention to the lagged way in which higher rates were affecting the economy.

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“This is increasing the risk of a recession that we don’t have to have and with that, a bigger rise in unemployment and a bigger fall in home prices,” Oliver said.

RBA governor Philip Lowe will face two parliamentary committees this week, starting with the Senate on Wednesday, where the bank’s actions will come under scrutiny.

The Reserve is driving up interest rates to deal with inflation, which reached a 30-year high of 7.8 per cent in the 12 months to the end of December.

In parliament, the Coalition used a string of questions to Prime Minister Anthony Albanese to argue government policy was driving up inflation. But Albanese said global factors were to blame.

“It is a reality of a world where there is inflation. I think Australians understand that. There is a lot of pressure, upward pressure, on interest rates at the moment,” he said.

Both the RBA and the federal Treasury believe inflation has peaked and expect it to moderate through the next two years. The Reserve expects it to be at 4.8 per cent by the end of 2023.

But Westpac economist Justin Smirk said on Monday inflation could fall faster than expected as price pressures in areas from petrol to furniture to the cost of holiday travel began easing rather than picking up.

“Our end of 2023 forecast for CPI is 3.9 per cent – well above the top of the RBA’s inflation target band, but still representing a meaningful moderation from the current pace,” Smirk said.

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