The RBA keeps hiking interest rates – but are the rate rises actually working?
News Source
•Tue, 13 Oct 2026 14:00:05 GMT
📰 What Happened
Australia's interest rates have risen to 15-year highs after four hikes this year. The Reserve Bank wants to cool spending to bring inflation back under 3%. Yet household spending is still growing, up nearly 7% compared with a year ago.
Economists say the rises have not fully hit the economy and may be less effective than they once were. Consumer confidence has dropped to its worst level since the 1990s. Inflation was 4% in August. Some experts warn more rate rises could be coming.
🔍 The Backstory
The RBA raises its main cash rate to slow spending and stop prices rising fast. Higher rates make loans cost more, so people spend less. But newer offset accounts let borrowers hold big cash buffers, which softens the effect. A third of households own their home without a mortgage.
The cash rate also affects the exchange rate and jobs. Traditionally, higher rates push up unemployment, which cools wage and price growth. This year that has not happened yet.
🎯 Why It Matters
Rate rises decide what you pay on a mortgage and what renters and savers face each month. If they are not working, prices may stay high for longer.
Australia's interest rates have risen to 15-year highs after four hikes this year. The Reserve Bank wants to cool spending to bring inflation back under 3%. Yet household spending is still growing, up nearly 7% compared with a year ago.
Economists say the rises have not fully hit the economy and may be less effective than they once were. Consumer confidence has dropped to its worst level since the 1990s. Inflation was 4% in August. Some experts warn more rate rises could be coming.
The RBA raises its main cash rate to slow spending and stop prices rising fast. Higher rates make loans cost more, so people spend less. But newer offset accounts let borrowers hold big cash buffers, which softens the effect. A third of households own their home without a mortgage.
The cash rate also affects the exchange rate and jobs. Traditionally, higher rates push up unemployment, which cools wage and price growth. This year that has not happened yet.
Rate rises decide what you pay on a mortgage and what renters and savers face each month. If they are not working, prices may stay high for longer.