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Shiloh Payne and business reporter Gareth Hutchens

Interest rate decision: RBA raises cash rate by half a percentage point to 1.35 per cent — as it happened

The Reserve Bank of Australia has announced a cash rate increase of 50 basis points, in line with economists' expectations.

Look back on the latest updates as they unfolded on our live blog.

Key events

Live updates

By Shiloh Payne

That's all for today's blog

Thank you for joining us this afternoon, and for all of your questions.

You can continue to stay up to date here on the ABC News website, and on our app.

By Shiloh Payne

What if I don't have a mortgage?

What does an interest rate rise mean for me? I don’t have a mortgage, but I do have numerous savings accounts.

- Young Person

Gareth Hutchens, our business reporter, says the cash rate rise can still impact you even if you don't have a mortgage:

When the cash rate increases it affects different people in different ways, even if you don't have a mortgage.

Do you have a personal loan or a car loan with a variable interest rate? If you do, your lender may choose to lift the rates on those loans by a little bit.

Or, if you have a savings account, the interest rate on your savings could increase which is great news for you.

The interest rates on credit cards don’t typically respond to changes in the cash rate, but they’re exorbitantly-high regardless of what the cash rate is doing. 

By Shiloh Payne

When were interest rates last this low?

Prior to the pandemic, how long ago was it that interest rates were this low?

- Dan

Here's business reporter Gareth Hutchens' response:

The Reserve Bank began officially “targeting” inflation in 1993. It was one of the first advanced economies to do so.

The theory behind inflation targeting says that, if we keep prices relatively stable and predictable, everyone can engage in their daily economic activity in a calm, orderly way, without having to worry about the value of the money deteriorating very much.

In the inflation targeting era, the RBA has tried to keep consumer inflation fluctuating between a range of 2 to 3 per cent on average over the cycle.

And since 1993, the cash rate has never been this low.

You might remember the cash rate was around 17 per cent in the very early 1990s.

At the start of the inflation targeting era, in 1993, it was around to 4.75%.

It picked up to 7.5 per cent in 1995, hovered around 5 per cent for the next decade, reached 7.25 per cent just before the global financial crisis hit in 2008, and then it began a slow, long-term deterioration all the way up to the pandemic, getting down to 0.75 per cent by February 2020 (at the end of that summer of horrific bushfires).

So, when the RBA dragged the cash rate down to 0.1 per cent during the pandemic – which were genuinely at emergency-level lows – interest rates had never been that low.

By Shiloh Payne

Who's going to be hit hardest by this rise?

ABC business editor Ian Verrender says it'll most likely be younger first home buyers:

"It's the first-home buyers who got in last year who are the ones who are … looking at quite a lot of angst in the future here.

"While a lot of them are on fixed rates and they probably don't run off for another year or two, they're looking at huge increases in their repayments once those fixed rates roll off.

"The younger you are and the more recently you've gotten into the housing market, the more extreme the pain is going to be."

By Shiloh Payne

Treasurer: Government working hard to boost capacity of economy

Federal Treasurer Jim Chalmers says inflation will get worse before it gets better.

"The government changed hands at a time of high and rising inflation, sky rocketing interest rates and falling real wages, and we have inherited a trillion dollars in debt which is now more expensive to service," Dr Chalmers says.

"When it comes to inflation we expect it to get worse before it gets better, and the Reserve Bank has flagged further rate rises."

"It's why we're making meaningful investments in cleaner and cheaper energy, cheaper child care, skills, the digital economy and manufacturing, and progressing our waste and rorts audit."

By Shiloh Payne

Key Event

The factors contributing to the rise

Reserve Bank governor Philip Lowe said Australia's high inflation is being driven by both global and local factors.

Here's a look at what some of those factors are:

  • the war in Ukraine
  • strong demand for goods and services
  • a tight labour market.

The size of next month's rate hike will depend on the next set of economic data, particularly, the ABS inflation figures for the June quarter.

By Shiloh Payne

Shadow Treasurer: Australians deserve a strong response to 'economic headwinds'

Angus Taylor, the shadow treasurer, has called on the Albanese government to deliver a strong response to counter the rising cost of living and soaring inflation.

Here's what he said:

'Australians deserve a strong response to these economic headwinds': Shadow Treasurer

By Shiloh Payne

Wait, what's a cash rate?

Hi Gareth! new home owner here and not sure how to understand all of this. what is a cash rate and why does it affect the interest rates of home loans? thank you!

- new to this

Hello, here's Gareth's answer to your question:

When it comes to the "cash rate," think of the financial system itself.

At the end of each day, banks lend or borrow money from each other overnight. They do that to ensure they have ample money for the next day's trading.

That little market is called the "cash market." And the price in that market is the interest rate on those interbank loans.

And that interest rate is referred to as the "cash rate."

The cash rate is an important interest rate because lots of other prices and interest rates in the financial system are based on it.

So the RBA deliberately changes the "cash rate" to manipulate the price of money flowing through the financial system.

For example, if it lifts the cash rate, banks will increase interest rates on the mortgages they provide because to cover the increased cost of borrowing money in the overnight cash market.

By Shiloh Payne

Shadow Treasurer calls for government to do more to ease cost of living pressures

The Shadow Treasurer Angus Taylor is calling on the government to urgently release a detailed economic plan and outline how it will ease cost of living pressures.

It comes as households deal with the rising cost of fuel, power and groceries as the cash rate rises.

The Government says it will outline measures on how it will ease cost of living pressures in the coming months, but Mr Taylor says that's not good enough. 

"Australians deserve a strong response to these economic headwinds and while Anthony Albanese is circumnavigating the globe he hasn't been able to deliver an economic plan that is needed right here and right now," Mr Taylor says.

By Shiloh Payne

How will this impact my savings account?

Will the rates go up on my savings account? I'm fortunate enough not to have a mortgage anymore, but I do have a bit of money tucked away

- Deb

Hi Deb,

According to our business reporter Gareth Hutchens, it's good news for you.

We put your question to him and here's what he had to say.

The interest rates on your savings account should go up! So pester your bank if it doesn't. The major banks can be tardy when it comes to lifting those interest rates, but smaller banks that offer competitive savings maximiser accounts can respond quite quickly.

By Shiloh Payne

Basis point? What's a basis point?

What does 50 basis points mean?

- Economics n00b

Hey there, here's what our business reporter Gareth Hutchens had to say:

There's a lot of jargon in the financial world, and "basis points" is just one term you'll hear. But experts use it to be more specific when they're talking about changes in small numbers.

It helps to know the difference between a "per cent" and a "percentage point."

Let's say the interest rate is 1 per cent.

If that increases to 1.5 per cent you can talk about that increase in two ways.

Firstly, if something increases from 1 per cent  to 1.5 per cent, that means the original 1 per cent has actually grown by 50 per cent. But no one talks like that when talking about small numbers.

So, to make the distinction clear, people say the change from 1 per cent to 1.5 per cent represents an increase of 0.5 percentage points.

And then, the experts just shorten that to "basis points."

"So, it's 50 basis points."

By Shiloh Payne

Key Event

Jim Chalmers says inflation will get worse before it gets better.

Treasurer Jim Chalmers has just spoken on the inflation rates.

He said the skyrocketing costs of essentials is putting extreme pressure on household budgets and the rise will add to the pain that people are feeling.

"Just because this was expected today doesn't make it any easier for people to cop," Dr Chalmers said.

Here's what he had to say:

Inflation to get worse before it gets better, Treasurer says.

By Shiloh Payne

What does this mean for my loan?

What does this do to a $200,000 loan

- John Zarnow

Hi John,

I've used our mortgage repayments calculator for some help on this one.

For a loan of $200,000, over a 30 year term at an interest rate of 1.35 per cent, this rise will mean that repayments will cost an extra $48 a month.

You can find this tool here and plug in your own loan size, term and interest rate.

By Shiloh Payne

Economist says borrowers should be able to handle this rate rise

Proptrack senior economist Eleanor Creagh says she believes most borrowers should be able to absorb the latest rate hike.

Borrowers should be able to handle latest rate hike, economist believes

By Shiloh Payne

How often can the RBA lift rates?

Do the RBA set dates set for further rate rises ? How many roughly could we see before the year is out ?

- IrishSte

Hey there IrishSte, thanks for your question.

The RBA meets on the first Tuesday of every month where they decide whether or not to adjust the cash rate.

The only exception is January, so they hold these meetings 11 times a year in total.

This means we could potentially see a cash rate rise or be adjusted each month before the end of the year.

By Shiloh Payne

RBA warns of more interest rate rises to come

The RBA has warned that interest rates will continue to rise over coming months.

Here's what RBA governor Philip Lowe had to say:

"Today's increase in interest rates is a further step in the withdrawal of the extraordinary monetary support that was put in place to help insure the Australian economy against the worst possible effects of the pandemic.

The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed.

The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead.

The size and timing of future interest rate increases will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labour market.

The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time."

By Shiloh Payne

Key Event

Use our mortgage rate rise calculator to work out how much your repayments might go up by

 The official cash rate is going up.

If you're on a variable rate, that means your repayments will probably increase too.

So, what does it mean for you?

Our repayments calculator shows how much more you will have to pay each month, just plug in your loan size, term and interest rate.

Just remember, individual lenders decide how much of the Reserve Bank of Australia's rate rise to pass on to customers, so check with yours to get an exact amount.

By Shiloh Payne

The RBA says household budgets are under pressure

Reserve Bank governor Philip Lowe says higher interest rates will help establish a balance between the supply and demand of goods and services.

He says the behaviour of household spending continues to be a source of ongoing uncertainty.

"The recent spending data have been positive, although household budgets are under pressure from higher prices and higher interest rates," he says.

"Housing prices have also declined in some markets over recent months after the large increases of recent years.

"The household saving rate remains higher than it was before the pandemic and many households have built up large financial buffers and are benefiting from stronger income growth.

"The Board will be paying close attention to these various influences on household spending as it assesses the appropriate setting of monetary policy."

By Shiloh Payne

What do you want to know about the rate rise?

Business reporter Gareth Hutchens is soon joining us to help answer all of your questions on interest rates.

Send us your questions and comments by using the 'leave a comment' button.

By Shiloh Payne

Key Event

The new cash rate is 1.35 per cent

The Reserve Bank of Australia has lifted the cash rate by 50 basis points.

It means the cash rate is now 1.35 per cent, up from 0.85 per cent last month.

The RBA has also increased the interest rate on Exchange Settlement balances by 50 basis points to 1.25 per cent.

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