The Reserve Bank decided to keep interest rates on hold at 4.1% because it thinks there’s a chance – just a chance – it has lifted them all it needs to.
Growth in the Australian economy had slowed and labour market conditions had eased, although they remained tight.
After 12 near-consecutive rate hikes, and in light of the “uncertainty surrounding the economic outlook”, it had decided to wait at least a month before hiking again until it knew more about the impact of what it has done on inflation and the health of the economy.
And when you compare Australians’ experience of rising rates with other countries, the Reserve Bank has already done more than many people realise.
Rising rates have hit Australian borrowers harder
That’s because an exceptionally large proportion of Australian mortgage holders are on variable rates: roughly 70%. That’s compared to 35% in Canada, 15% in the UK, 12% in New Zealand and less than 5% in the United States.
In the words of Australia’s Reserve Bank: “interest rates on loans with very long fixed-rate terms tend to be less sensitive to changes in the short-term rates”.
In contrast – as this Reserve Bank chart shows – the rates actually paid in New Zealand had climbed by one and half percentage points, the rates in the UK by just half a percentage point, and the rates in the United States by very little at all.
Increases in mortgage rates actually paid
Months since the official rate began climbing. 100 = one percentage point