The Reserve Bank raised interest rates another 0.25 percentage points, with more potentially on the horizon if inflation remains stubbornly high.
The cash rate target has risen from 3.85 per cent to 4.1 per cent in June – a decade high – in a move that will push even more Australians into mortgage stress after more than a year of bill hikes.
Another $76 will be added to monthly repayments on a typical $500,000, 25-year home loan, according to RateCity, bringing the total squeeze since May 2022 to more than $1100 a month.
RBA governor Philip Lowe said central bankers decided to hike in June amid fears high inflation for services will be too persistent because of rising wages and very low productivity growth.
“Inflation in Australia has passed its peak, but at 7 per cent is still too high and it will be some time yet before it is back in the target range,” he said in a statement.
“This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe.”
Experts were split on whether the RBA would hike in June, with some expecting a pause in the rates cycle after a series of economic figures showed demand is now slowing across Australia.
But other economists who expected a hike had argued the RBA would be too concerned about its inflation reduction plan being derailed by fast rising prices for essentials like energy and rent.
The cash rate target has now increased more than 4 percentage points since from a record low 0.1 per cent, with all of the hikes coming over the past 13 months.
Households are clearly struggling under the weight of the increases, with Roy Morgan estimates showing more than 1.4 million homeowners were at risk of mortgage stress moving into June.
Another 30,000 families will become at risk due to today’s increase, Roy Morgan has claimed.
Dr Lowe, who has repeatedly acknowledged the financial toll higher rates are taking on families, said on Tuesday that more rate increases may be needed to curb inflation by mid-2025.
But they are not inevitable, with crucial calls in July and August to be driven by incoming data.
“The Board will continue to pay close attention to developments in the global economy, trends in household spending, and the outlook for inflation and the labour market,” Dr Lowe said.
“The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”
