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The Reserve Bank has raised the cash rate by 0.25 percentage points to 4.6 per cent, adding more than $90 a month to repayments on a typical $600,000 mortgage.
The Reserve Bank has raised the cash rate by 0.25 percentage points to 4.6 per cent, up from 4.35 per cent, the highest official interest rate in 15 years.
The decision was made by the Reserve Bank's Monetary Policy Board. The move adds more than $90 a month to repayments on a typical $600,000 mortgage with 25 years remaining. It is a blow to homeowners with large mortgages and is the highest cash rate millions of households have faced since taking on a mortgage after 2011. Individuals with high-interest savings accounts could see their savings earn more interest if their bank applies higher rates.
Cash Rate Rise Hits Australian Mortgages
Australia now has one of the highest official rates among western economies, surpassing the United States at 4 per cent and the United Kingdom at 3.75 per cent. The last time Australia's cash rate was above 4.5 per cent was October 2011. Outstanding mortgage debt has more than doubled since then, magnifying the impact on households. Total residential mortgages were $1.05 trillion in 2011 and have climbed to $2.51 trillion, according to the Australian Prudential Regulatory Authority.
The RBA has now lifted rates by 1 percentage point across four separate increases this year to reduce inflation. Senior RBA officials have warned they are losing patience with the time it is taking to drag inflation back into the 2 to 3 per cent target range. In July, headline inflation was running at an annual pace of 3.5 per cent and underlying or core inflation was running at 3.6 per cent.
The RBA wants inflation around 2.5 per cent on average over the medium term. Australia's inflation rate has been above the target band for much of the past five years. Price pressures have been stoked by elevated fuel prices caused by the Middle East conflict, which has dragged on since February and continues to disrupt global oil supplies. The latest fighting has sent crude oil prices higher and pushed more inflation around the world via higher fuel prices.
Petrol Prices Pressure Household Budgets
Average petrol prices in Australia have risen above $2 a litre in the past month, pressuring the Albanese government to revive fuel excise cuts that subsidised the cost for four months from April through July. Fuel costs are spurring other price rises as firms pass on the cost. Global interest rates have climbed to two-decade highs amid concerns about higher inflation and geopolitical risk.
In recent weeks, the European Central Bank, US Federal Reserve, Bank of Japan and Reserve Bank of New Zealand have all lifted rates. Reserve Bank governor Michele Bullock warned last week the jobless rate may need to rise as high as 5 per cent to ease pressure on inflation. Last month the unemployment rate reached 4.6 per cent, the highest in nearly five years, but the deterioration was not enough to deter the RBA from lifting rates.
Higher interest rates will hit a housing market already weakened by higher borrowing costs and federal tax changes. Figures released in early September by property analytics firm Cotality showed house values have fallen. Ahead of the decision, AMP chief economist Shane Oliver said he expected the bank to continue warning of further rate hikes, but that the tone may shift later in the year.
Economic Slowdown May Limit Rate Hikes
He said after more than five years of above-target inflation threatening RBA credibility, it does not have the luxury of continuing to wait and assess. Oliver said by the November meeting there is likely to be more evidence of a cooling economy, falling home prices, a softer jobs market and rising recession risks, so a second hike let alone a third is not expected to be necessary.
He said rate hikes and higher petrol prices have raised additional monthly costs for an average household by $530 a month since January for those with a mortgage and petrol car, describing that as quite a hit. The economy grew by 2.1 per cent last financial year, but gross domestic product per person rose by a more subdued 0.7 per cent. The Reserve Bank is forecasting growth to slow to 1.5 per cent in the year to June 2027.
Inflation peaked at nearly 8 per cent at the end of 2022 but then fell back into the RBA's 2 to 3 per cent target range for a period in 2024 and 2025. However, it picked up in the second half of 2025 and has remained above target since. Bullock and other RBA officials have said repeatedly the bank is focused on getting inflation back into the 2 to 3 per cent band.
The RBA's decision to lift rates came one day before the Bureau of Statistics releases its September quarter inflation data.
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brisbanetimes:RBA hikes interest rates to 4.6 per cent in 15-year high 
abcnews:Breaking: RBA lifts rates to highest level in 15 yearsThis story was compiled and edited by the HeadTopics newsroom and HT AI from the reports above.
Cash Rate 4.6 Per Cent Australian Mortgage Repayments Australian Inflation Michele Bullock Reserve Bank Of Australia Cash Rate Interest Rates Inflation Mortgage Repayments
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