RBA interest rates: Bullock says ‘pain now’ will prevent worse later as Reserve Bank hikes rates for fifth time

Reserve Bank of Australia increases official cash rate to 4.85%, bringing it to highest level since 2008

RBA interest rates live updates: Reserve Bank cash rate decision

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The Reserve Bank governor Michele Bullock has said that “some pain now will prevent even worse pain down the track,” after lifting official interest rates to an 18-year high of 4.85% in a bid to combat persistent inflation.

The RBA’s decision to hit mortgage holders for a fifth time in 2026 will intensify pressure on indebted households, but signals from the central bank suggest policymakers may now wait to gauge the full economic fallout before pulling the trigger again.

The decision split the monetary policy board, with six members voting for a hike, while three were in favour of holding the cash rate steady.

Bullock told journalists shortly after the rate decision that inflation needed to come down “and we will do what is necessary to achieve that”.

In its post meeting statement, the RBA did not include an explicit reference to the potential need for further hikes, signalling the RBA is now prepared to wait and see the effects of this year’s multiple rate rises.

Economists from major investment houses, including UBS, understood the change in language from past statements to be “clearly dovish”, signalling the likelihood that rates would remain were they are at least in the short term.

The back-to-back hikes will heap more pain on over 3.3m households with home loans and turn the screws on a federal government under pressure for its economic management.

The latest rate rise will lift the monthly interest payment on a $700,000 home loan by $107, according to Canstar, bringing the total rise in repayments over this year’s five hikes to $532.

Bullock said on Tuesday that while the rate rise, which informs mortgages, is not the news that many Australians want to hear, “it is what’s needed to get inflation down”.

“Some pain now will prevent even worse pain down the track,” Bullock said.

As the central bank struggles to explain to Australians how interest rate hikes will help tame inflation made worse by events overseas, the RBA’s latest set of forecasts in its Statement on Monetary Policy (SOMP) showed a difficult period ahead for the economy.