The Reserve Bank of Australia has delivered a shock 12th rate hike since May last year, deciding to lift interest rates in a bid to tackle persistently high inflation.
The central bank chose to lift the cash rate target by 25 basis points to 4.10 per cent, surprising the financial markets and the majority of economists who predicted a pause on rate hikes in June.
For the average Australian mortgage, today’s rate hike represents an additional $1,264 in mortgage repayments since the cash rate was 0.10 per cent in April 2022.
In his monetary statement RBA Governor Philip Lowe said today’s increase was a necessary step to contain inflation, which is not reducing at the bank’s expected rate.
“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,” Lowe said.
“This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe.”
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Graham Cooke, head of consumer research at Finder, said the decision came as a shock to many.
“The RBA continues to operate in the dark, as our panel of economists are split on the bank’s intentions,” he said.
“Aussies with an average loan size of $577k will be spending over $15k more per year on their mortgage compared to what they were in April last year.
“That’s an additional $1,200 every month – a huge amount of extra money to be forking out on your mortgage.”
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