Reserve Bank of Australia announces rate rise: What does this really mean for Aussie families?

Introduction

Both on social media and in the news, it is evident that there has been a lot of tension preceding the Reserve Bank of Australia’s announcement concerning interest rates on Tuesday. Just before the Melbourne Cup got underway, the RBA announced that they would be once more raising the national interest rate, a decision that has not been warmly welcomed by many Australians. As many families struggle with the rising cost of living, an increase to the national interest rate is the last thing on their Christmas wish-list. Today’s blog post breaks down the recent change to interest rates and what it means for ordinary Australians.

Problem

On Tuesday, the interest rate was increased to 4.35 percent from 4.1 percent. The RBA has raised the interest rate to make sure inflation does not take too long to go down. According to the RBA, inflation has not gone down enough, and it is harder to reduce than they thought it would be. The RBA believe that continued high inflation has a negative impact on the economy and people’s lives, in the form of increased unemployment, interest rates, decreased savings value, greater inequality between incomes, making life more expensive, and causing difficulties in investment and organizing for businesses.

Inflation is currently impacting the cost of services, nationally house prices still are increasing, and the job market is limited. Furthermore, the growth in dwelling investment, and consumption by families, is not strong, and unemployment is expected to grow. Wage growth, however, is increasing.

There is no guarantee that this is the last rate rise, with another announcement from the RBA to come in early December.

Some issues that may affect future interest rates are the wars overseas and problems in China’s economy, not knowing how the economy will be impacted by changes to interest rates or how major companies will act, that foreign countries have experienced inflation in services prices and this may happen in our nation, and how different families are having different experiences in the current economy. Some are struggling financially, others with large savings, selling their house in a time of increasing home prices, or those that make money at a higher interest, are reaping the advantages.

Advice

However, by the time 2025 finishes, the Consumer Price Index, CPI, will be two to three percent, which is at the peak of the maximum of the ideal range. In the meantime, it is important to budget strategically, save as much as you can, and avoid unnecessary spending.

The increase in interest rates will no doubt impact many households throughout Australia. If you are struggling, it is worth speaking to a financial expert for advice. You can also talk to your bank if you are having difficulties making repayments, whether for your credit card, mortgage, or other loans.

Key points

Outlined below are some key points to keep in mind throughout the latest rate rise.

• Budget and spend your money wisely.
• Don’t panic, the RBA are working to bring inflation down.
• There is still one more announcement to be made by the RBA in December.
• High inflation and high interest rates both negatively impact the economy over time.
• Speak to a financial expert if you are struggling with your expenses.

It is more important now than ever before to have a chat with an expert if you are having difficulties with your finances.

Conclusion

In conclusion, the most recent rate rise is only going to make things tougher for families that are already doing it tough. However, the friendly team at AA Finance Solutions are here for you, providing expert support in a variety of financial areas.

If you’d like to get in touch with our team, go to the contact page of this website for all the details.