Six board members voted for the hike and three voted to hold. The cash rate is now at its highest level since 2008.
Inflation and the outlook
Governor Michele Bullock said the decision was needed to bring inflation down. “Some pain now will prevent even worse pain down the track,” she said. “I know this is not the news that many Australians want to hear, but it is what’s needed to get inflation down.”
The RBA’s Statement on Monetary Policy forecasts inflation rising to about 4.5 percent in late 2026. Inflation is then expected to return to the 2-3 percent target range about nine months later than the bank had hoped. Oil prices are expected to ease over 18 months but to stay elevated.
Households and the political response
Canstar calculated that the latest increase adds 107 AUD a month to interest payments on a 700,000 AUD loan. The five hikes this year together add 532 AUD a month.
Treasurer Jim Chalmers said higher fuel prices linked to the Middle East conflict were the main driver of the inflation surge. “Our budgets are not what’s putting upward pressure on inflation,” he said. Opposition leader Angus Taylor blamed government spending. “Labor’s spending spree is driving up inflation, it’s driving up interest rates, and Australians are paying the price,” he said.
Signals from the statement
The post-meeting statement dropped an explicit reference to the need for further hikes. UBS called the change clearly dovish. EY’s Cherelle Murphy said the RBA is likely to wait and see over the summer.
The bank sees no evidence of recession over the next two years. Unemployment is currently 4.7 percent, and the RBA forecasts 4.9 percent at the end of next year.
Related: ECB's Lagarde says rate hikes will stay, urges digital euro by 2026 · Poland's Dąbrowski sees no need for rate hike for now
