The Reserve Bank of Australia has raised the official cash rate to 0.85 per cent, a 50 basis point increase that will add significant financial pressure on homeowners. The move, which surprised some economists, marks the second consecutive rate hike as the central bank attempts to curb rising inflation.
According to the Australian Council of Social Service, the rate rise could push low-income households to the brink. Peter Davidson from ACOSS warned that those already struggling with rent or mortgage payments face even greater hardship, with rental costs already exceeding $200 to $400 per week in many areas.
Treasurer Jim Chalmers acknowledged the difficulty for homeowners, particularly those with large mortgages. He noted that the government faces higher costs servicing its nearly $1 trillion debt and will announce additional cost-of-living measures in the October budget. Chalmers described the situation as a 'cost of living crisis' that has been building for a decade.
Economists forecast the cash rate could reach 2.5 per cent by the end of next year. If that occurs, a borrower with a $500,000 loan could see monthly repayments rise by $652 by Christmas 2023. Chalmers warned that inflation will likely worsen before improving, and the Reserve Bank is leaning toward larger, faster rate increases.
