Australian Homeowners Brace for Another Round of Mortgage Pain

Australia’s inflation rate has accelerated to a six-month high of 4.3 per cent, intensifying pressure on the Reserve Bank to deliver a fifth interest rate increase at next week’s Melbourne Cup Day meeting.

Annual inflation climbed from 4 per cent in August to 4.3 per cent in September. It was the highest reading since March, when inflation reached 4.6 per cent.

Global X senior investment strategist Marc Jocum described the result as a serious setback for the RBA and said it had substantially strengthened the case for another rate rise next week.

Financial markets reacted swiftly, with the probability of a November rate hike rising from roughly 60 per cent before the figures were released to about 80 per cent afterwards, Mr Jocum said.

A further increase would lift the cash rate from 4.60 per cent to 4.85 per cent.

For a borrower with a $600,000 home loan, the move would add approximately $92 to monthly repayments, following an increase of about $364 from the four rate rises already delivered this year.

If all five increases are passed through, monthly repayments would be around $456 higher, amounting to an additional $5,472 each year.

Treasurer Jim Chalmers said the conflict in the Middle East and rising oil prices were adding to Australia’s inflation pressures.

“Australia was already facing an inflation challenge, and the war in the Middle East is making that challenge worse,” Mr Chalmers said.

“Higher oil prices have pushed inflation up around the world, and today’s figures show Australia is not immune. From an economic perspective, that is why the end of the war in the Middle East cannot come soon enough.”

Daily Mail Political and Economics Editor Peter van Onselen argued the government should reduce spending to help ease pressure on prices.

“Jim Chalmers can highlight international forces driving inflation, but that makes fiscal restraint at home even more important. The government cannot control global prices, but it can decide how much it spends—and we are spending beyond our means,” he said.

“If the Treasurer refuses to cool the economy through spending cuts, the RBA will have to do it through higher interest rates. Mortgage holders and heavily indebted businesses will pay the cost of his unwillingness to make difficult budget decisions.”

“A targeted austerity program would allow the government to decide where savings should be made. Higher interest rates are a blunt tool that weighs on households, deters investment and threatens jobs. Mr Chalmers must explain why spending restraint is unacceptable while another hit to family budgets is considered acceptable.”

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The latest inflation figures have also undermined the Albanese government’s earlier suggestion that the worst of Australia’s cost-of-living challenge had passed.

In January 2025, Mr Chalmers said Australia had “turned a corner” after headline inflation fell to a near four-year low of 2.4 per cent in the December quarter.

“The worst of the inflation challenge is now well and truly behind us, and that is one of the reasons we are confident—but not complacent—about the economy in the year ahead,” he said at the time.

He also argued the economy was on course for a ‘soft landing’.

‘The soft landing that we have been planning for and preparing for is now looking more and more likely.’

The latest figures show prices rising across every major spending category, adding to the strain on household budgets.

Petrol prices jumped 9.4 per cent in September after rising 14.8 per cent in August. Prices were almost 24 per cent higher than a year earlier.

Transport recorded the biggest annual rise of any major spending category, up 8.7 per cent in the year to September. Housing had the second-largest increase, at 5.2 per cent.

Education costs rose 4.7 per cent, recreation and culture increased 4.5 per cent, and alcohol and tobacco climbed 4.3 per cent.

Insurance and financial services were 3.9 per cent more expensive than a year earlier, while health costs rose 3.7 per cent.

Food and non-alcoholic beverages increased 3.2 per cent, and communication costs climbed 2.3 per cent.

Smaller annual increases were recorded for furnishings, household equipment and services, up 0.8 per cent, and clothing and footwear, up 0.4 per cent.

Shadow Treasurer Tim Wilson said government spending had been been the key driver of the elevated core inflation or underlying inflation.

‘That’s why interest rates keep going up,’ he told News24.

‘Until you contain government spending, Australians will pay more on their mortgages and go to the supermarket and pay more and get less.’