Budget and Bank Rate Hikes Shift Costs to Households

The Reserve Bank raised the cash rate to 4.85 per cent, and Australia’s major banks said they’d pass the increase on to borrowers. Households facing rising costs now have to absorb decisions made by the central bank, government and lenders, while advice on coping often boils down to finding savings in their own budgets.

Canstar money expert Sally Tindall said renters and borrowers were “sick of being punching bags” while people with savings accounts benefited. She urged people to tell the government and the Reserve Bank that enough was enough, and to write to the Treasurer and Reserve Bank governor.

Who sets the terms

In an opinion column, Parnell Palme McGuinness criticized the 2026 federal budget for being produced with little consultation and relying on rushed Treasury modelling. McGuinness said Prime Minister Anthony Albanese, Treasurer Jim Chalmers and Finance Minister Katy Gallagher bore primary responsibility for policies she considered poorly designed and implemented.

The column said the capital gains tax increase prompted immediate backlash from small businesses and technology start-ups, after which the government offered carve-outs. The change is scheduled to take effect in the tax year beginning July 2027. McGuinness argued that investors were already responding to the structure, which she said would discourage investment in riskier small Australian ventures.

McGuinness also criticized the end of negative gearing on existing properties. She said house prices had fallen by more than the 2 per cent dampener Treasury modelled, while neither Treasury nor the Treasurer’s office had released the assumptions behind that modelling.

The column described first-home buyers using the 5 per cent deposit scheme as owing 95 per cent on assets losing value. Falling house prices, rising interest rates, a tight rental market and cost-of-living anxiety were harming Australians, it said. McGuinness argued that ordinary investors wouldn’t see the additional tax in their returns until after the 2028 election, and said Albanese could claim a mandate if the measures survived an election. She also referred to a broken promise from before the previous election.

Bills passed down

The Reserve Bank’s increase was its fifth that year. For a loan of $731,000, Compare the Market said each 25-basis-point rise added $114 a month; the five increases added $584 a month in mortgage payments.

David Koch, economics director at Compare the Market, urged households to review energy, car, home and health insurance, phone bills, subscriptions and mortgage costs. Small savings across several expenses could add up to “serious money,” he said. Koch advised borrowers to know their rate, compare offers and call their bank to ask whether it could offer a better home-loan rate.

Westpac announced first among the major banks that it would pass on the full increase, effective November 13. Westpac chief executive, consumer, Carolyn McCann said: “We know another interest rate increase may be difficult for many households, particularly those who have already adjusted their budget this year.” National Australia Bank announced it would also pass on the full 25-basis-point increase. Commonwealth Bank said its home-loan variable-rate changes would take effect November 13, and ANZ was the last of the four to signal a rate change. ANZ group executive Pedro Rodeia said savings and mortgage rates would rise and encouraged customers to discuss their finances and options with the bank.

Reserve Bank governor Michele Bullock said Australians would be hit hard and that people would feel poorer. “Their spending can't grow very quickly because their incomes aren't growing very quickly,” she said, linking that to weak productivity growth and a “massive supply shock.”

Questions the official answers leave open

McGuinness criticized the budget costings and a post-budget Senate inquiry she described as rushed and rigged. She also wrote that Treasury’s lead actuary had called the government’s plan to cut National Disability Insurance Scheme costs implausible.

The column said the 5 per cent public-service efficiency dividend requested by the finance minister after the last election hadn’t materialized as the public-service wage bill surged. It described Jim Chalmers as wanting recognition that inflation came from elsewhere in the world, Katy Gallagher as wanting credit for efforts to control costs, and Anthony Albanese as preferring to be elsewhere.

Tindall said the Reserve Bank’s “one lever” was “not fair, not equitable and it's not working,” and said the central bank hadn’t properly tested an alternative to cash-rate hikes. She urged people to write to the Treasurer and the Reserve Bank governor. Tindall also advised borrowers to seek a rate cut or shop around, and to request hardship support if they couldn’t get relief. Those steps put the immediate work on households, even as the decisions shaping their bills remain with government, the central bank and banks.