The official interest rate has hit a nine-year high, with the RBA announcing a cash rate increase of 25 basis points to 2.6 per cent.
In an online statement, RBA Governor Philip Lowe said the cash rate has increased substantially in a short period of time.
“Reflecting this, the Board decided to increase the cash rate by 25 basis points this month as it assesses the outlook for inflation and economic growth in Australia,” he said.
“As is the case in most countries, inflation in Australia is too high. Global factors explain much of this high inflation, but strong domestic demand relative to the ability of the economy to meet that demand is also playing a role.”
The rise marks the sixth month in a row the RBA has increased the cash rate, albeit a reduced increase compared to previous .50 basis point raises. The cash rate represents the interest rate on unsecured overnight loans between banks and serves as the benchmark rate for mortgages, savings accounts and exchange rates.
Head of consumer research at Finder Graham Cooke said people with a $500,000 mortgage will be paying almost $9,000 more a year in interest when compared to six months ago.
“Australians with a $500,000 mortgage will be forking out $735 more per month compared to what they were paying in April,” he said.
“That’s a whopping amount of extra money to pay every month – especially when everyday items like groceries and petrol are skyrocketing in price.”
Mr Lowe signalled in his statement that more increases are likely over the coming months.
“The Board expects to increase interest rates further over the period ahead,” he said.
“It is closely monitoring the global economy, household spending and wage and price-setting behaviour.
“The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. “
