Big four banks pass on RBA rate rise
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More news: Within hours of the Reserve Bank of Australia’s decision to increase the cash rate by 0.25 basis points to 4.10%, the four big banks all announced that they would pass on the rate hike to their customers.
The Commonwealth Bank of Australia said it will increase its home loan variable rate in line with the RBA rise of 0.25% per annum, effective from 27 March 2026. “We recognise interest rate changes can put additional pressure on household budgets and influence how people plan and manage their finances,” Angus Sullivan, CBA’s group executive of Retail Banking said in a statement.
Westpac will increase home loan variable interest rates by 0.25% per annum for new and existing customers, effective 31 March 2026, while the bank’s Westpac Life total variable rate with bonus interest will increase by 0.25% per annum to 4.75% per annum, effective 27 March 2026. Chief executive of Consumer at Westpac, Carolyn McCann said: “Westpac customers paying principal and interest will be notified directly about what this will mean for their repayments and how they can make changes, which includes via the app, the website or by contacting the bank.”
NAB and ANZ also said they will increase their home loan variable interest rates by 0.25% per annum from 27 March 2026. ANZ said it is continuing to review other interest rates.
Macquarie Bank said it will make changes to interest rates across its variable home loan and deposit products, increasing variable interest rates paid on its transaction and savings accounts by 0.25% per annum and increasing its variable home loan reference rates by 0.25% per annum from 2 April 2026.
Ben Perham, head of Personal Banking at Macquarie Bank, said: “We know the RBA’s decision to lift rates again will come as unwelcome news to many mortgage holders…In February, many banks chose to pass on higher home loan rates in just days, while we took a different approach. We were the slowest of the major banks, waiting over two weeks so our customers had more time to adjust and plan their finances. We’re doing that again and want to remind customers that they can easily apply for financial assistance online, at a time that suits them, if they’re concerned about making their loan repayments or their circumstances have changed.”
RBA governor warns government cost-of-living subsidies could worsen inflation
The news: Reserve Bank governor Michele Bullock has told reporters that any cost-of-living assistance introduced by governments to assist households during this period of high fuel prices could worsen inflation.
Speaking at the post-rate decision press conference on Tuesday afternoon, Bullock walked journalists through the possible impact of subsidies, such as for fuel, on inflation figures.
“I don’t know what governments are going to do,” Bullock said.
“But if there are subsidies for certain things, then yes, that will have an impact on headline inflation, depending on how big those sorts of subsidies are,” she said.
“On underlying inflation, it depends. Because underlying inflation is about trimming out the sort of the edges, the very high ones that are increasing by a lot, ones that aren’t increasing by much or decreasing, and then taking the middle sliver, if you like, or the middle chunk.
“So if those subsidies, if they did do that like they did with the petrol subsidies, they tended to get trimmed out ... So underlying can be affected but probably less so than headline.”
Chalmers warns length of inflation shock remains unclear as Middle East war rages
More news: Treasurer Jim Chalmers does not know “how enduring the very substantial economic pressures” caused by war in the Middle East will be, after the Reserve Bank raised interest rates on Tuesday.
Speaking less than an hour after the decision, Chalmers insisted the development was not a surprise but said that “doesn’t make it any easier for millions of Australians with a mortgage”.
The treasurer warned Australia’s inflation challenge was being exacerbated by the US-Iran war, which has strangled the Strait of Hormuz, through which a fifth of global oil transits.
“We know we had an inflation challenge already in our economy,” he told reporters.
“Developments in the Middle East are already making that challenge harder, rather than easier, and the Reserve Bank board has taken this decision independently today to increase interest rates in the face of those pressures.”
Chalmers said that expectations of a rate hike this month sat at about 10% before the US’ assault on Iran but jumped to roughly two-in-three after.
He said the government was not certain how long the inflation shock would last, saying that would depend on the length of the war.
“These global risks are very substantial. We’re not immune from them, but we are better placed than most to deal with them,” he said.
The US has offered mixed messages over the length of its war in the Middle East, which has expanded across the region after Iranian reprisals.
But Chalmers declined to offer a direct message to US President Donald Trump, saying only that the economic impacts of the war were substantial.
“I’m not going to personalise that as free advice for President Trump,” he said.
Chalmers’ new opposite number, shadow treasurer Tim Wilson, blamed government spending for the rise, saying Australians were “living the consequences of the treasurer’s inflation denial”.
“Twelve months ago the treasurer said Australia had turned the corner on inflation and interest rates, but … [he] doesn’t understand that by pouring debt petrol on the inflation fire he is stoking it,” Wilson said in a statement.
“The treasurer will blame international factors, but Australia’s inflation problem was reported in the December data from Canberra, not March in Tehran”.
What they said: “The impacts of what we’re seeing in that part of the world are already substantial, but we don’t know yet how enduring those very substantial economic pressures will be,” Chalmers told reporters in parliament.
“It depends very heavily on how long the conflict in the Middle East continues for at a time of great uncertainty.”
Economists say oil price shock forced RBA’s hand on rate hike
More news: Economists believe the RBA was forced to hike interest rates following the monetary policy board’s March meeting due to the inflationary pressures of the oil price shock sparked by the US-Israel war with Iran.
Oxford Economics Australia head of economic research and global trade Harry Murphy Cruise said that without the Middle East conflict, he thinks that “the RBA would have waited until May to hike”.
“Higher oil prices not only lift petrol prices but also raise production and transport costs across the economy, while disruptions to key fertiliser exports from the Middle East could push food prices higher,” Cruise said.
He said the economic advisory firm’s modelling suggests an extra 0.3 points has already been added to annual inflation in Q1.
“If prices stay above $100 per barrel through Q2, they could add a further 0.75ppts — lifting inflation to around 4.7% in the June quarter,” Cruise said.
“Oil price shocks are a central bank’s worst nightmare. The only thing that will bring oil prices down is more supply flowing through the Strait of Hormuz — and no amount of interest-rate hikes will convince Iran to reopen that passage. Instead, the RBA must manage inflation (and inflation expectations) by slowing the rest of the economy.”
BNY APAC Macro Strategist Wee Khoon Chong said “the non‑unanimous vote reflects ongoing geopolitical uncertainties, but is unlikely to halt the tightening trend so long as the labour market remains tight and inflationary pressures persist”.
“It wouldn’t be surprising if a de‑escalation in geopolitical tensions re‑ignites expectations of further rate hikes,” Chong said.
RSM Australia economist Devika Shivadekar said: “the energy shock is a real but uncertain overlay on top of an already-hot domestic inflation picture”.
She noted that the RBA monetary policy board appears to be “explicitly naming the wage-price spiral risk as a deciding factor — a dynamic they would be desperate to get ahead of. Once expectations become entrenched, the policy cost of dislodging them is far higher”.
“Perhaps the most telling line in the statement: the Board judged that ‘the risks have tilted further to the upside, including to inflation expectations’.”
Reserve Bank increases rates to 4.10%
The news: The Reserve Bank has increased rates by 25 basis points to 4.10% marking its second consecutive hike in line with market expectations. It was a markedly split decision from the monetary policy board.
The rise was voted on by five of the monetary policy board’s members. Four members voted to hold the cash rate steady at 3.85%.
The numbers: Higher than expected inflation and lower than expected unemployment figures for the end of December and start of January then prompted the RBA to increase the cash rate to 3.85% at the first meeting of the monetary policy board in February.
Economists had been split on whether to expect a rate hike this month after trimmed mean inflation for the 12 months to January came in higher than expected at 3.4% and the unemployment rate in January held steady at 4.1%, tighter than preferred by the RBA.
Interest rates peaked at 4.35% in December 2024 during the last rate increase cycle before falling to 3.6% by mid-2025.
The context: Despite the split in expectations earlier in the month, most economists and the money market brought forward rate hike expectations after RBA deputy governor Andrew Hauser made comments in a podcast interview that were interpreted as hawkish.
He reiterated the central bank’s inflationary concerns that the Australian economy is near the limits of its productive capacity and rising labour demand. The oil supply shock flowing from the US-Israel war with Iran has also increased inflationary pressures on the Australian economy, particularly through the price of fuel.
On Tuesday morning, ahead of the rate decision, the ANZ-Roy Morgan Australian Consumer Confidence index hit its lowest level since 2020 and inflation expectations remained at their highest level since November 2022.
What they said: “While inflation has fallen substantially since its peak in 2022, it picked up materially in the second half of 2025. Information since the February meeting suggests that some of the increase in inflation reflects greater capacity pressures,” a statement by the RBA monetary policy board reads.
“In addition, the conflict in the Middle East has resulted in sharply higher fuel prices, which, if sustained, will add to inflation. Short-term measures of inflation expectations have already risen.
“As a result, the Board judged that there is a material risk that inflation will remain above target for longer than previously anticipated.”
The sources: Reserve Bank monetary policy statement, Westpac media statement, Macquarie media statement, CBA media statement, ANZ, NAB
