Australia's Reserve Bank has raised the cash rate by 0.25 percentage points to 3.85%, catching markets off guard and adding roughly $150 per month to repayments on a $1 million mortgage.
The move, announced Monday, signals the RBA's continued concern about sticky inflation despite softening economic conditions across the country. It's the latest blow to Australian households already struggling with the cost of living crisis.
For mortgage holders, the arithmetic is brutal. On a standard $1 million home loan, this quarter-point increase means an extra $1,800 per year in interest payments. For the average Sydney or Melbourne mortgage, it's money that was already stretched thin.
The timing has political ramifications. With a federal election looming, Labor now faces voters who are watching their mortgage repayments climb while wages struggle to keep pace. The opposition will hammer this relentlessly.
The RBA's decision suggests the central bank believes inflation remains too high to justify rate cuts, despite recent data showing consumer spending has softened and retail conditions have deteriorated. The board is betting that keeping rates elevated is necessary to anchor inflation expectations.
Renters won't escape the pain either. Landlords facing higher mortgage costs typically pass those increases through to tenants, adding further pressure to Australia's already strained rental market where vacancy rates in major cities remain near historic lows.
The increase comes as Australian households are dealing with multiple financial pressures - elevated energy costs, rising insurance premiums, and stubborn grocery inflation. The RBA is effectively asking households to absorb more pain to bring inflation back to the target band.
Mate, there's a whole continent down here, and right now millions of Australians are doing the maths on whether they can still afford their homes. The RBA has made its call, and households will pay the price.
