Any joy among homeowners about the prospect of a healthier retirement nest egg will be lost by the more immediate likelihood of another interest rate rise on Tuesday.
Just 48 hours after the federal government announced its plan to lift the superannuation guarantee to 12 per cent from nine per cent by 2020 as part of its initial response to the Henry tax review,the Reserve Bank of Australia (RBA) board is widely tipped to lift the cash rate again.
Economists expect the central bank to pull the rate trigger for a third month in a row, lifting the cash rate to 4.5 per cent from 4.25 per cent - the sixth increase since October.
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Financial markets are pricing in a more than 60 per cent chance of a move, backed by new data on Monday showing a 20 per cent surge in annual house prices and rising inflation pressures.
TD Securities strategist Roland Randall expects the RBA will want to get the cash rate to a more normal level as soon as possible, and likely increase the rate on Tuesday.
"The strength of domestic data, including consumer and asset price inflation, is undeniable," he said.
Capital city House prices rose 4.8 per cent in March quarter
The Australian Bureau of Statistics house price index released on Monday showed the average house price across the nation's eight capital cities rose by a further 4.8 per cent in the March quarter.
This bumped up the annual rate to 20 per cent, its highest level since the series began seven years ago, and outpacing the 2003 housing boom.
The annual rise was led by a 27.7 per cent jump for Melbourne houses and 21 per cent for Sydney.
"The fact that the government keeps spending money puts upward pressure on interest rates, the fact that housing prices continue to go up puts upward pressure on interest rates," opposition treasury spokesman Joe Hockey told Sky News.
"The Reserve Bank has a very blunt instrument, which is monetary policy. And that policy prescription spells danger not just for Australian homeowners but also for Australian small businesses because ultimately it's going to be more expensive for small business to borrow money."
The TD Securities-Melbourne Institute monthly inflation gauge also released on Monday rose by a further 0.4 per cent in April, lifting the annual rate to 2.9 per cent from 2.5 per cent over the year to March.
This is just shy of the RBA's two to three per cent inflation target band.
At the same time, activity in the manufacturing sector expanded at its fastest pace in nearly eight years in April.
The Australian Industry Group-PricewaterhouseCoopers performance of manufacturing index (PMI) rose 9.3 index points to 59.8 points in April, and comfortably above the 50 level that separates expansion from contraction in the sector.
"Although manufacturers are still battling severe headwinds in the form of the high (Australian) dollar, the withdrawal of the fiscal stimulus and the return to normal interest rates, the April Australian PMI shows a sector gaining lost ground as activity across the economy broadens," Ai Group chief executive Heather Ridout said on releasing the data.
