SYDNEY – Australia’s central bank today hiked interest rates to a 11-year high, putting mortgage holders under mounting pressure as it tries to curb inflation.
The Reserve Bank of Australia lifted borrowing costs by 25 basis points to 3.6%, marking the 10th successive increase.
The bank has been criticised for raising interest rates – and pushing up mortgage repayments – as people face spiralling food and electricity prices.
“Global inflation remains very high. It will be some time before inflation is back to target rates,” bank governor Philip Lowe said in a statement.
Lowe said he expected further rate increases would be needed to return inflation to the bank’s 2-3% target range, and he vowed to “do what is necessary” to get there.
Household inflation in Australia is above 7%, according to the latest government figures.
The widely anticipated rate hike comes as central banks around the world continue to tighten monetary policy in the face of runaway food and energy prices, exacerbated by the war in Ukraine.
Australia, like most countries fighting inflation, faces a delicate balancing act to bring prices down without stifling economic growth and sparking a recession.
Jim Chalmers, the Australian government’s most senior economic minister, said the rate rise “would make life harder for many Australians who are already under the pump”.
“This was expected, it was flagged, the markets anticipated it, but it will still sting,” he said.
A major risk is whether Australian homeowners can afford to pay the higher interest rates tacked on to their mortgages.
Market research firm Roy Morgan last year estimated that one in five Australian households were under “mortgage stress” and struggling to meet repayments. – AFP, March 7, 2023
