THE Reserve Bank of Australia (RBA) increased the cash rate target by 25 basis points to 3.85 per cent from 3.6 per cent on Tuesday, February 3.
In a statement about the increase, the RBA said: “A wide range of data over recent months have confirmed that inflationary pressures picked up materially in the second half of 2025. While part of the pick-up in inflation is assessed to reflect temporary factors, it is evident that private demand is growing more quickly than expected, capacity pressures are greater than previously assessed and labour market conditions are a little tight.”
“The Board judged that inflation is likely to remain above target for some time and it was appropriate to increase the cash rate target.”
Many economists have placed the increase in interest rates blame at massive government spending.
Following the RBA’s announcement, Certified Practising Accountants (CPA) Australia said the interest rate rise will hit households and small businesses hard.
“Borrowers who had been encouraged by recent rate cuts will be deeply disappointed, particularly households coming off long–term fixed rates who are now facing much higher repayments,” said Business and Investment Lead at CPA Australia, Gavan Ord.
“Small businesses remain under pressure from high borrowing costs, rising inflation and low consumer confidence,” Mr Ord said. “For many, there are no easy options left.”
In simple terms, if your home loan was $600,000, your minimum monthly repayment has increased by +$90, so your new minimum monthly repayment would now be $3,782.
While RBA governor Michele Bullock did not point the finger at the federal government, other financial experts and interested parties have blamed government spending for the increase in interest rates.
Early indicators suggest that interest rates will rise again in May this year.
