RBA interest rates: Central bank piles pain on households with fourth rate rise and risk of more to come
Homeowners will bear the brunt of the Reserve Bank’s fight against inflation as it hits mortgage holders with a fourth rate hike this year.
Home borrowers have been hit with another interest rate hike, taking the Reserve Bank’s cash rate to a 15-year high of 4.6 per cent with the Middle East conflict and AI data centre construction expected to keep inflation elevated.
The RBA’s nine-member monetary policy board voted unanimously to raise the cash rate for the fourth time this year to the highest point since November 2011, adding more than $100 to monthly repayments on an average new mortgage.
Another follow-up hike by Christmas is regarded as likely, which would take the cash rate to an 18-year high of 4.85 per cent and see variable mortgage rates climb above 7 per cent for the first time since the global financial crisis in late 2008.
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By continuing you agree to our Terms and Privacy Policy.“The board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed,” the RBA board said.
Tensions in the Middle East, that have seen Iran-backed attacks on Saudi Arabia’s East-West Pipeline, were cited in the RBA decision.
“Inflation remains elevated and some of the upside risks flagged in August are materialising,” it said.
“The conflict in the Middle East has broadened and global energy prices are now much higher than had been assumed in the August forecasts.
“Global oil supply disruptions are maintaining upward pressure on global and domestic energy prices and inflation.”
The construction of AI data centres is also expected to add to demand in the economy.
“AI-related demand is driving rapid growth in global prices for technology-related goods. And there remains pressure on domestic capacity,” the RBA said.
“Liaison indicates that firms are experiencing cost pressures and are either increasing the prices of their goods and services or looking to do so.”
Treasurer Jim Chalmers was quick to blame US President Donald Trump for the latest rate hike.
“The war in the Middle East is pushing up inflation and interest rates all around the world but that doesn’t make it any easier for Australians,” he said.
“Australian workers didn’t choose this war, but they are paying a hefty price for it.”
The RBA also warned of weak economic growth continuing amid lacklustre productivity that stirs inflationary pressures if GDP expansion is above 2 per cent.
“A period of prolonged uncertainty may also cause growth to be lower overseas and in Australia,” the RBA said.
“To date, however, growth in Australia’s major trading partners has been stronger than expected, as the boost from AI-related investment has outweighed the adverse effects of the Middle East conflict.
“In Australia, weak productivity growth continues to constrain potential growth and there are uncertainties about the economic effects of the downturn in the housing market.”
A borrower with an average new mortgage of $731,000 will see their monthly repayments climb by another $121, adding up to $1452 over the year.
Since February, monthly repayments for the same-sized mortgage have soared by $475, or an annual pace of $5700.
The RBA monetary policy board opted to raise interest rates even though the Australian Bureau of Statistics isn’t releasing inflation data until Wednesday.
But the consumer price index in July was at 3.5 per cent, putting it above the RBA’s 2 to 3 per cent target for the 12th-straight month.
