Aussies have tightened their belts, so why did rates go up again?

Marina Karpathios
12:00pm September 30 2026

“There's nothing I can say to make households feel better about this,” governor Michele Bullock said of the Reserve Bank’s decision to raise rates for the fourth time this year. (Image: Unsplash)  

"There's nothing I can say to make households feel better about this."

With those words, RBA governor Michele Bullock acknowledged the reality facing millions of borrowers after the central bank lifted the cash rate by 0.25 percentage points to 4.6 per cent, its highest level since 2011.

Faced with the choice between a hold and a 25 basis point hike, the monetary board unanimously opted for the latter, in line with market expectations. It marks the fourth rate rise of the year, following a brief respite for mortgage holders during August’s pause.

Bullock recognised the strain on Australians who are now facing the highest cash rate level in 15 years. 

“Every household has seen how the price of everything has gone up in recent years. Pay packets don't go as far as they used to,” she said. 

Yet she made clear the board remains laser-focused on bringing inflation back to its 2-3 per cent target range.

Why did the RBA raise rates again?

Inflation is currently running at 3.5 per cent, above the RBA's target band, while underlying inflation remains elevated.  

The central bank believes a combination of global and domestic pressures is making the job of lowering inflation more difficult.

Areas of the RBA’s concern include a growing demand for resources from the global AI investment boom and signs that Australia's economy may be operating closer to capacity than previously thought.

Bullock faced repeated questioning about the role government spending is playing in the economy and noted, “inflation is too high and is being driven by domestic capacity pressures.”

The RBA governor was also blunt about global factors.  

"The Middle East conflict has been a big shock and it's made us all poorer in this country," she said, citing the flow-on effects on fuel, transport and other costs which are increasingly being passed through to consumers.

Could there be another rate rise this year?

Higher interest rates are designed to cool demand by making borrowing more expensive and encouraging households to save rather than spend.

The RBA hopes that slower spending growth will help ease inflation without causing a sharp dip in the labour market.

Bullock stressed that the central bank “doesn’t like the idea of job losses,” and is wanting to preserve as many of the gains in employment as possible. At the same time, the latest RBA's statement contained some of its strongest language in months, warning it remains prepared to raise rates again if necessary.  

Westpac Chief Economist Luci Ellis believes the hurdle for another increase is relatively low.

Ellis tips another hike in November as the base case, citing the resurgence in oil prices and the RBA's growing concern that upside inflation risks are materialising.  

Asked whether mortgage holders were bearing the brunt of economic problems largely beyond their control, Bullock conceded many borrowers would feel that way.

"I understand why the people who are impacted very directly feel they are carrying the burden," she said.

But the governor argued higher interest rates still work by slowing demand across the economy, saying monetary policy "gets into all sorts of cracks".  

The RBA is signalling it is prepared to continue its (now six-year) battle to get inflation back to target. 

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