{"id":950935,"date":"2026-11-03T10:08:20","date_gmt":"2026-11-03T10:08:20","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/950935\/"},"modified":"2026-11-03T10:08:20","modified_gmt":"2026-11-03T10:08:20","slug":"rba-interest-rate-hike-everything-you-need-to-know-about-the-18-year-high-and-what-it-means-for-your-mortgage","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/950935\/","title":{"rendered":"RBA interest rate hike: Everything you need to know about the 18-year high and what it means for your mortgage"},"content":{"rendered":"

Updated November 3, 2026 \u2014 6:02pm,first published 2:35pm<\/p>\n

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Treasurer Jim Chalmers has vowed to play a \u201chelpful role\u201d to bring down inflation with government spending cuts after the Reserve Bank pushed up interest rates to an 18-year high despite fears the move could push the economy into a recession<\/a>.<\/p>\n

In a sign of concerns about the fallout from its decision, the RBA\u2019s monetary policy board split 6-3 to take the cash rate to 4.85 per cent on Tuesday, its fifth hike this year. On a 30-year $600,000 mortgage, the increase will add almost $100 to monthly repayments.<\/p>\n

\"TreasurerTreasurer Jim Chalmers said government cuts would play their part. Alex Ellinghausen<\/p>\n

Declaring that the economy was not yet \u201ccracking\u201d, Reserve Bank governor Michele Bullock said that even though the country was not in a recession, it would feel that way to many as they dealt with falling real wages, higher inflation and higher interest rates on their mortgages.<\/p>\n

\u201cIt is going to make people feel like it\u2019s a recession because they feel poorer. Their spending can\u2019t grow very quickly because their incomes aren\u2019t growing very quickly,\u201d she said. \u201cThis is a manifestation of the lack of productivity growth and the fact that we\u2019ve had this massive supply shock imposed upon us and we\u2019re all poorer.\u201d<\/p>\n

Financial markets believe the bank is now finished with rate rises, with expectations that the RBA will be cutting rates early in 2028.<\/p>\n

Related Article\"Reserve<\/a><\/p>\n

Crucially, the bank dropped the line that it will \u201cincrease the cash rate target further if needed\u201d from its statement: a sentence that has appeared in statements accompanying several of its previous decisions.<\/p>\n

The government\u2019s expenditure review committee met earlier this week as it nails down expected spending cuts to be contained in the mid-year budget update due in early December.<\/p>\n

Chalmers said the government\u2019s budgets were not a primary contributor to inflation, but it took responsibility for the fight against higher inflation.<\/p>\n

\u201cWe can play a helpful role and that\u2019s what we intend to do,\u201d he said. \u201cThat\u2019s why we\u2019ve had savings in all of our budget updates, and that\u2019s why there will be more savings in the mid-year budget update that I release in just over a month\u2019s time.\u201d<\/p>\n

Opposition Leader Angus Taylor accused the government of having a \u201cspending addiction\u201d, describing the rate rise as a \u201chomegrown\u201d issue.<\/p>\n

\u201cThe RBA has made the point that public spending is growing faster than the overall economy,\u201d Taylor said. \u201cIt\u2019s pretty simple: if you\u2019ve got public spending growing faster than the economy, you\u2019re stoking inflation. That\u2019s the reality.\u201d<\/p>\n

Updating its key economic forecasts, the bank revealed it now expects public demand \u2013 which includes federal and state government spending \u2013 to grow 2.1 per cent this year. In August, it had expected 3.2 per cent growth.<\/p>\n

But some of that slowdown is likely due to spending being pushed into 2027. In the 12 months to June next year, public demand is expected to grow by 3.8 per cent after previously being forecast to grow by 3.1 per cent.<\/p>\n

In its latest forecasts, the bank revealed it did not expect trimmed mean inflation \u2013 the bank\u2019s preferred gauge of price pressures \u2013 to reach the middle of its 2 to 3 per cent target until June 2028, and that headline inflation would peak at 4.5 per cent by Christmas before beginning to fall.<\/p>\n

The Middle East conflict and AI boom have intensified the fight to slow price growth.<\/p>\n<\/p>\n

A key issue fuelling higher inflation is the price of oil. In August, the RBA expected Brent to be down around $US76 a barrel. Today, it is $US104 a barrel and has averaged above $US110 for the past two months. The bank\u2019s forecasts still expect oil to cost around $US80 a barrel by the end of 2028.<\/p>\n

Another factor is the AI construction boom<\/a>. Business investment, largely in data centres and computer servers, is expected to grow by 12 per cent this year. In August, it had expected investment to grow by 4.3 per cent.<\/p>\n

AI and computer component companies around the world are pushing through large price rises which are then showing up in higher inflation figures. The bank warned that the AI construction boom could hurt the home construction sector.<\/p>\n

\u201cThe ramp-up of investment in data centres may also contribute to capacity and pricing pressures domestically, particularly by drawing on resources in the construction industry,\u201d the bank said. \u201cAI-related investment is driving rapid growth in prices for technology-related goods, and inflation in many goods and services remains high.\u201d<\/p>\n

Related Article\"Economists<\/a><\/p>\n

The bank also said there had been a sharper downturn in the housing market than it had been anticipating, partly driven by government tax changes brought in earlier this year.<\/p>\n

Bullock noted that the upside risks to inflation that had forced the bank to lift rates earlier this year, such as the surge in oil prices, were now beginning to \u201ccentralise\u201d.<\/p>\n

The bank noted that a combination of higher interest rates, higher inflation and the fall in property prices could hit domestic economic activity harder than expected. It estimates that if consumers start pulling back on discretionary spending faster than forecast, the overall economy could be a full percentage point – or about $28 billion \u2013 smaller by the end of 2028 than anticipated.<\/p>\n

If that were to occur, unemployment would likely approach 5.5 per cent, a full half percentage point higher than the RBA is forecasting.<\/p>\n

The head of Australian economics for the Commonwealth Bank, Belinda Allen, expects the RBA to start cutting rates from the second half of next year. But she said the Reserve would be wary at moving too quickly.<\/p>\n

\u201cOverall though we think the RBA will remain on edge as we enter 2027 but keep rates on hold,\u201d she said.<\/p>\n

NAB chief economist Sally Auld said with interest rates at their current level they should slow the economy and bring inflation down.<\/p>\n

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Close\"ShaneShane Wright<\/a> is a senior economics correspondent for The Sydney Morning Herald and The Age.Connect via X<\/a> or email<\/a>.\"MillieMillie Muroi<\/a> is the economics writer at The Sydney Morning Herald and The Age covering workplace and economics. She was formerly an economics correspondent based in Canberra\u2019s Press Gallery and the banking writer based in Sydney. Instagram\/TikTok: @millie.muroiConnect via X<\/a> or email<\/a>.From our partners<\/p>\n","protected":false},"excerpt":{"rendered":"Updated November 3, 2026 \u2014 6:02pm,first published 2:35pm Save You have reached your maximum number of saved items.…\n","protected":false},"author":2,"featured_media":950936,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-950935","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/950935","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=950935"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/950935\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/950936"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=950935"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=950935"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=950935"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}