A fifth RBA rate rise will hurt households — governments must act smarter, not louder

The Reserve Bank of Australia is widely expected to deliver a fifth interest‑rate increase, one that will push the cash rate to its highest level since 2008. Bank economists are warning of a “sharper, longer slowdown” for the nation as higher borrowing costs collide with softer house prices and the ripple effects of conflict overseas. For ordinary Australians—mortgage holders, small business owners, and workers—this is not an abstract debate about macro policy. It is a direct hit to household budgets and to the viability of local businesses that employ our neighbours. Central banks raise rates to rein in inflation, and the RBA is clearly fighting an inflation problem that officials judge to be persistent. But the choice facing policymakers is not simply whether to raise rates again; it is how to use the limited policy tools available while protecting the most vulnerable. Higher rates cool demand by making debt servicing more expensive, slowing spending, and ultimately increasing unemployment. Economists’ warnings that the downturn could be deeper and longer are a timely reminder that monetary tightening comes with real economic pain. That is why interventions from political leaders matter — and why some recent interventions risk doing more harm than good. When state leaders publicly warn that another rate rise will force shops to close and cost jobs, they are highlighting a genuine fear. But pointing the finger at the RBA alone misses the point and risks politicising an adjustment that needs careful, coordinated management. Fiscal policy has a role to play; so too does sensible, targeted support for households under the most strain. Governments at both federal and state levels should be looking at the evidence set out in public analysis: blanket spending increases that fuel demand indiscriminately will only add to the RBA’s dilemma. Equally, indiscriminate austerity would deepen the slowdown and push more people into hardship. The right response is more surgical — prioritise assistance for the least well‑off, avoid broad tax cuts that flow largely to higher‑income households, and restrain new spending commitments that would be inflationary without addressing cost‑of‑living pressures directly. For many Australians the concern is immediate: mortgage repayments are rising, shops are quieter, and employers say they cannot afford wages they once paid. That is a recipe for worsening unemployment and social strain. Voters’ anger is already noticeable; politicians should not stoke it by turning macroeconomic reality into a blame game. Instead, they should explain clearly what they are doing to protect jobs and incomes, and how they will help firms adjust to a higher‑rate environment. There are no painless choices. But there are responsible ones. The RBA must pursue its inflation mandate while communicating the likely path clearly. Governments must resist short‑term political reflexes and work together on targeted, evidence‑based measures to shield the vulnerable and help businesses restructure. Ordinary Australians need policymakers to focus on sensible trade‑offs, not grandstanding. The coming months will be difficult — and how leaders manage those difficulties will determine whether the slowdown is merely sharp, or unnecessarily long and damaging.