Westpac senior economist Bill Evans said if the bank’s forecasts for the economy were correct “the case for a first rate hike in the next tightening cycle by the August board meeting in 2022 is strong”.

Its previous forecast was for a rate hike in February 2023.

The Commonwealth Bank has tipped a rate hike in November and both are well ahead of the RBA’s own forecasts of 2024. The NAB and ANZ still have 2023 chalked in for a rate hike.

Evans said the impact from the Omicron variant would mean economic growth would be 5.5 per cent this year after 3.3 per cent last year. This is a revision on the bank’s previous forecasts of 6.4 per cent in 2022 and 2.8 per cent for 2021.

However, he said that would not have a significant impact on jobs growth, wages or inflation.

“We have not changed our call for the first rate hike in the overnight cash rate by the RBA since June 2021 when we were early to challenge the “not till 2024 consensus”,” Evans said.

“Developments since then have prompted us to bring forward the tightening date to the meeting on August 2, 2022.

“We now expect one hike of 15 basis points in August to be followed by a further hike of 25 basis points in October.

“Our forecast revisions reflect a much faster lift in inflation and wages growth than envisaged last June.

“While we have shaved economic growth rate in 2022 due to the Omicron-related contraction in consumer spending in January, we do not see that as being significant for our wages/inflation/employment profile.”

If such a hike were to occur it was likely to have a significant impact on the housing market. Basic home loan rates are currently around 2 per cent with Westpac’s own variable rate at 2.29 per cent. Fixed rate loans have been rising for several months as the markets grew nervous about inflation.

Evans said underlying inflation would continue to rise with an expectation it would reach 2.9 per cent by August.

“This will mean that by the time of the August meeting the board will have observed three consecutive quarters in which annual underlying inflation has achieved or exceeded its target,” Evans said.

He said Omicron had dented economic growth but consumer spending for 2022 would still be 7.6 per cent higher, down from the previous forecast of 9.4 per cent.

Westpac’s call came as an update on unemployment showed it was at its lowest level since August 2008. Underemployment and underutilisation were also the lowest since November 2008, as was youth unemployment.

Australia added 64,000 new jobs in December, pushing the unemployment rate down to 4.2 per cent during the month, according to the latest data from the Australian Bureau of Statistics.