Australia raises interest rates to 15-year high | Business and Economy News
Reserve Bank of Australia Raises Benchmark Rate to 4.6 Percent Amid Persistent Inflation
Published on September 29, 2026
Australia’s central bank has enacted a significant increase in interest rates, reaching their highest level in 15 years, which will likely impact mortgage payments for millions of households across the country.
The Reserve Bank of Australia (RBA) announced on Tuesday that it raised the benchmark interest rate by 0.25 percentage points to 4.6 percent—the highest rate since 2011. This decision comes as inflation remains stubbornly high, prompting the bank to act in response to previously identified “upside risks.”
In its statement, the RBA highlighted that increased energy prices, partly attributable to the ongoing United States-Israel conflict involving Iran, as well as a surge in technology costs driven by artificial intelligence advancements, have contributed to the inflationary pressures.
“There continue to be heightened uncertainties about the outlook for domestic economic activity and inflation,” the bank noted. It emphasized the unresolved nature of the Middle East conflict, suggesting potential scenarios in which inflation rates could exceed forecasts while economic activity falters.
Global oil supply disruptions are also putting upward pressure on both global and domestic energy prices, maintaining the inflation trend. “A period of prolonged uncertainty may result in lower growth both overseas and in Australia,” the RBA added.
As of July, Australia’s annual inflation rate stood at 3.5 percent, significantly above the central bank’s target range of 2 to 3 percent. Central banks typically opt to increase benchmark interest rates when prices are perceived to be rising too quickly.
Higher interest rates generally elevate borrowing costs, including those for mortgages, which can cool consumer demand and help mitigate inflation. The latest increase compounds the financial strain on Australian households already affected by three prior rate hikes this year.
Research from Roy Morgan indicates that nearly one-third of Australian mortgage holders—approximately 1.8 million individuals—were facing “mortgage stress” as of July, defined as spending between 25 to 45 percent of after-tax income on mortgage payments.
Treasurer Jim Chalmers, while not directly responsible for interest rate decisions, acknowledged the additional hardship the rate hike would cause for many Australians. “We know a lot of Australians are under pressure, and this will make things harder,” Chalmers said in a statement posted on social media platform X.
He recognized the global trend of rising inflation and interest rates but underscored that this does not lessen the impact of the RBA’s decision on everyday Australians. Chalmers affirmed the government’s commitment to combatting inflation through responsible budget management, ongoing tax relief initiatives, and addressing long-term economic challenges amid an uncertain global landscape.
