Australia raises interest rates to 15-year high

What the report says

Australia’s central bank has raised interest rates to their highest level in 15 years, increasing the benchmark cash rate by 0.25 percentage points to 4.6 percent. The Reserve Bank of Australia said the move was driven by inflation that remains above target, with policymakers warning that recent risks to prices had materialized. Al Jazeera reported that the decision was announced on Tuesday and was the first rate increase in five months.

The bank pointed to higher energy costs, linked in its statement to the United States-Israel war on Iran, as well as rising technology costs and broader uncertainty over the outlook for the economy. Inflation in Australia was reported at 3.5 percent in July, above the central bank’s 2 to 3 percent goal. Higher rates typically make borrowing more expensive, including for mortgages, and are intended to reduce spending and slow price growth.

The increase is expected to put additional pressure on households already facing several earlier hikes this year. Al Jazeera cited a Roy Morgan estimate that nearly one-third of mortgage holders were at risk of mortgage stress as of July. Treasurer Jim Chalmers said the decision would make life harder for many Australians, while also stressing the government’s efforts to help with cost-of-living pressures and manage the budget responsibly.