The Reserve Bank of Australia has lifted the official cash rate to 4.35 per cent, delivering a third consecutive interest rate hike as escalating conflict in the Middle East drives up global oil prices and inflation.
The central bank’s board confirmed the 25 basis point increase following its meeting on Tuesday afternoon, returning the cash rate to its previous peak reached before a brief easing cycle in 2025.
The decision comes as tensions in the Strait of Hormuz disrupt global energy supplies, adding further pressure to already elevated inflation.
Cargo ships and oil infrastructure were reportedly damaged on Monday as hostilities briefly resumed in the critical shipping corridor, sending oil prices sharply higher.
The benchmark Brent crude oil price jumped 5.5 per cent to about $US114 a barrel, increasing the risk of sustained inflation through higher fuel and transport costs.
Prime Minister Anthony Albanese said Australians were feeling the financial impact of a conflict far from home.
“We want to see the conflict end because it is having a massive impact on the global economy,” he told reporters in Brisbane.
Opposition Leader Angus Taylor blamed the rate rise on government spending, arguing it had contributed to inflationary pressures.
The rate hike will add further strain on mortgage holders, with an average borrower with a $600,000 loan expected to pay more than $270 extra per month following the three consecutive increases since February.
Economists said inflation pressures were proving more persistent than anticipated, with rising construction costs, international airfares and food prices expected to continue increasing in coming months.
The Reserve Bank’s updated Statement on Monetary Policy, also released on Tuesday, is expected to show higher near-term inflation forecasts, alongside weaker economic growth as higher interest rates and energy costs weigh on activity.
Despite the tightening conditions, household spending has remained relatively resilient.
Australian Bureau of Statistics data showed spending rose 1.6 per cent in March, largely driven by higher fuel costs, though discretionary spending also held up.
Commonwealth Bank payments data recorded a 6.7 per cent increase in spending in early April compared to a year earlier, suggesting consumer behaviour has yet to significantly shift.
However, economists warn conditions are likely to tighten further, particularly in the housing sector.
Rising construction costs, already elevated following the pandemic, are expected to increase further due to the conflict, placing additional pressure on housing supply.
While dwelling approvals had been trending upward, headwinds are building as higher interest rates and rising costs weigh on the sector.
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