The Reserve Bank of Australia raised the cash rate by 0.25 percentage points in February, delivering another blow to mortgage holders while benefiting retirees with savings deposits.
The decision, reported by the ABC, exposes the generational divide at the heart of Australia's inflation battle: younger Australians with mortgages pay the cost, while older Australians with deposits reap the rewards.
Mate, there's nothing subtle about this split. For a household with a $600,000 mortgage, this rate hike adds roughly $125 per month to repayments. That's real money for families already stretched by cost-of-living pressures. Meanwhile, retirees with $500,000 in term deposits will see their annual interest income rise by more than $1,200.
The RBA justified the move by pointing to persistent inflation and a tight labour market. Australia's inflation rate remains above the central bank's target band, and wages growth continues to put upward pressure on prices.
But here's the uncomfortable truth: monetary policy hits different generations differently. Younger Australians, who entered the housing market when prices were at record highs and borrowed heavily to afford a home, now face a double squeeze of high house prices and high interest rates.
Older Australians, many of whom paid off their mortgages decades ago when houses cost a fraction of today's prices, benefit from higher returns on their savings with no corresponding debt burden.
This isn't the RBA playing favourites - it's just how interest rates work in an economy where wealth is concentrated among older homeowners and younger people carry massive debt loads.
Economists have long warned that Australia's overheated housing market creates these distortions. When house prices climb so high that buyers need to borrow six or seven times their annual income, even modest rate movements cause severe pain.
The political implications are significant. With a federal election likely within months, the government will face questions about whether it's doing enough to help mortgage holders. Opposition parties are already calling for relief measures.
But the RBA operates independently of government and makes decisions based on economic data, not electoral calendars. The central bank's mandate is to control inflation and maintain employment - not to protect borrowers from rate rises they signed up for when they took out variable-rate loans.
That doesn't make it any easier for the families now cutting back on essentials to keep up with repayments. Or for the young couples who've watched homeownership slip further out of reach as borrowing capacity falls with each rate hike.
The rate rise comes as economic growth slows and unemployment edges up. Some economists argue the RBA is tightening too aggressively, risking a recession to combat inflation that's already moderating.
Others say the central bank is doing what it must to prevent inflation from becoming entrenched. If prices keep rising at current rates, they argue, everyone suffers in the long run - even if some suffer more in the short term.
What's clear is that Australia needs a broader conversation about housing affordability, debt levels, and how we distribute the costs of economic adjustment. Monetary policy alone can't fix structural problems decades in the making.
For now, mortgage holders will tighten their belts while savers count their returns. That's the reality of fighting inflation in a country where housing debt defines the economic experience of an entire generation.
