The Reserve Bank of Australia (RBA) has increased its benchmark cash rate by 0.25 percentage points to 4.1 per cent, a level not seen since a year ago. The decision, made at the latest monetary policy board meeting, was not unanimous, with the board split on the timing of the hike rather than its necessity.
All four major banks have responded by raising interest rates on their variable rate mortgage products, adding financial pressure on borrowers. Macquarie Bank, the latest lender to react, will increase variable home loan reference rates by 0.25 per cent from 2 April 2026.
RBA Governor Michele Bullock emphasised that the economy cannot sustain current demand levels, separate from external pressures such as the Iran war. The conflict has contributed to surging oil prices, with Brent crude rising nearly 4 per cent to $103.90 US per barrel, and the Strait of Hormuz remains effectively closed to normal shipping.
Despite concerns about a potential recession, Governor Bullock clarified that the RBA's strategy is not to create a negative output gap, and the bank remains committed to preserving employment gains. The board faces uncertainty over the duration of the Iran war, which shows no signs of ending soon.
Meanwhile, a Senate Select Committee report on the capital gains tax discount, released alongside the RBA announcement, found that the 50 per cent discount, combined with negative gearing, skews housing ownership towards investors and disproportionately benefits the wealthy.
