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While interest rates are at a 2011-level, house prices are nowhere near the same.
While interest rates are at a 2011-level, house prices are nowhere near the same. Economists say that while interest rate hikes hurt, high inflation would have worse implications.
The economic climate in 2011 was vastly different to today and interest rates are about where the comparison ends. The average home loan has more than doubled since then, and the average house price has increased from 115 to 130 per cent, varying by state and territory. Richard Holden, professor of economics at the University of New South Wales, said rising property prices meant households were carrying more debt on average.
"Any given increase in interest rates has much more of an effect than it did 15 years ago," he told SBS News. Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
"The Reserve Bank seems to have really pivoted to tackling inflation more seriously, and that's going to take most likely another couple of rate rises ... it's just the beginning of more pain for those households. " Wages haven't moved at the same pace as rising house prices and the cost of entering the market has exploded. The average mortgage in 2011 was equivalent to around 5.4 years of average full-time earnings, while it's now closer to 6.7 years.
In 2011, the average loan size for a first-home buyer was $281,100, according to data from the Australian Bureau of Statistics . Changes to the ABS data collection for Housing Finance data were made in 2019, producing a "level shift" in the available historical data. The ABS said the figures "remained conceptually similar to those published in the existing publication, but with improved quality".
Source: SBS News In 2026, that figure is $731,000, ranging from $516,000 on average in Tasmania to $842,000 in NSW, according to ABS and Canstar data. House prices have surged due to a number of factors — RBA researchers have found that increases are driven by demand that consistently outstrips supply. In a 2024 report, RBA assistant governor Sarah Hunter pointed to population growth as a factor contributing to this demand, calling for a "balancing" of the scales.
But there has been growing interest in how negative gearing and capital gains tax discounts in housing influenced the steep incline in housing prices this century, a hypothesis supported in a 2024 study from the University of New South Wales. The current average variable rate is between 6.24 and 6.62 per cent for owner-occupiers, meaning the average Australian is spending $4,500 to $4,680 per month on their mortgage.
Assuming banks pass on the change in full, Canstar predicts the average owner-occupier variable rate will climb to 6.49 per cent. In that case, it isn't just homeowners with mortgages who are impacted — Holden said that while it was difficult to determine due to many competing factors, there was anecdotal evidence suggesting interest rate hikes can be passed down from borrowers to renters.
Warwick McKibbin, emeritus professor of economics and public policy at the Australian National University, says that unlike in 2011, this month's hike comes at a time of high uncertainty for the global economy.
"It's very different," he told SBS News, pointing to what he described as "large waste" in government revenue accumulated amid Australia's early 2000s resources boom, when mining investment surged from historical averages of 1.5 per cent to 9 per cent of GDP by 2012. "Instead of being saved, like the Norwegians did with their sovereign wealth fund, with all the revenue from the oil boom going into a sovereign wealth fund, we just spent it on government outlays and subsidies.
" Because of this, McKibbin said, Australia was now in a "much worse" economic position, in which the pressure of high interest rates would fall on both borrowers and the government. "We had that opportunity to reduce debt to much lower levels, and we didn't. Now, the government has to service its debt, which is now much larger than it was in 2011.
" The RBA has delivered four consecutive interest rate hikes this year, in a bid to bring inflation down. On Wednesday, Australia's annual headline inflation rate jumped to 4 per cent for the 12 months to August 2026, up 0.5 per cent since July. McKibbin says regardless of any pain caused by high interest rates, the consequences of high inflation were "far worse".
"Mortgage holders will have to pay more, and mortgages are much bigger than they were back in 2011. So the impact on their individual household budget is going to be more severe.
" But, he said, it was dangerous to look in isolation at who was going to lose, especially in the face of high inflation and its impact on cost of living pressures for people at the lower end of the income scale. While interest rates would impact many households, McKibbin said Australians would overwhelmingly benefit from inflation coming down and cost increases slowing.
"The reality is that interest rates have to go up when there's too much demand in the economy, and these federal and state governments are responsible," he said. "It's important that this is done. And the reasons for doing it must be understood by the Australian public.
""But if we don't get inflation under control, that really hurts everybody, particularly those at the lower end of the income distribution. "Sign up now for daily news from Australia and around the world. You can also subscribe to Insight's weekly newsletter for in-depth features and first-person stories.
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