RBA Governor Michele Bullock Warns of Additional Rate Hikes to Tame Inflation — 2026

Quick answer: RBA governor Michele Bullock has signalled that further interest rate increases remain on the table if inflation does not return to the RBA's 2–3% target band. Australian mortgage holders should prepare for the possibility of higher repayments in the months ahead.

Reserve Bank of Australia (RBA) governor Michele Bullock has put Australian borrowers on notice: the central bank is willing to lift interest rates further if inflation proves stickier than expected. Speaking in late July 2026, Bullock made clear that the RBA's primary mandate — keeping inflation within the 2–3% target band — has not yet been fully secured, and that additional hikes are a live option on the table.

For the roughly 3.2 million Australians with variable-rate mortgages, this is not welcome news. Even a single 25-basis-point (0.25%) increase translates to hundreds of dollars in extra annual repayments on a typical loan. Below, we break down what Bullock actually said, why inflation is proving so stubborn, what the RBA's options look like, and — most importantly — what you can do right now to protect your household budget.

What Michele Bullock Actually Said

Bullock's warning was direct: the RBA has not ruled out further tightening. While the board has been willing to pause and assess the impact of prior hikes, the governor emphasised that a pause is not the same as a pivot. The distinction matters enormously to financial markets and to borrowers.

Key themes from her remarks:

Inflation remains above target. Despite a significant tightening cycle, services inflation — driven by wage growth, rents, and domestic demand — has remained elevated.
Labour market resilience is a double-edged sword. Low unemployment is good for workers but keeps wage-price pressures alive, complicating the RBA's task.
Global uncertainty adds risk. Geopolitical tensions, energy prices, and supply chain dynamics continue to inject volatility into Australia's inflation outlook.
The board is data-dependent. Future decisions will hinge on quarterly CPI (Consumer Price Index) releases, labour force data, and retail spending figures.

Note: "Data-dependent" is central bank language for "we'll move if the numbers force our hand." For borrowers, that means each major economic data release becomes a potential trigger for a rate decision.

Why Is Inflation Still a Problem in 2026?

Australia's inflation story in the mid-2020s has been stubbornly two-speed. Goods inflation — the price of things like electronics, clothing, and cars — has broadly come down as global supply chains normalised after the pandemic disruptions of the early 2020s. The problem is services inflation, and it has proven far more resistant to rate rises.

Services Inflation: The Sticky Part

Services inflation covers things like restaurant meals, hairdressing, insurance premiums, childcare, and rent. These prices are driven primarily by domestic labour costs and demand — not global supply chains — which means cutting interest rates elsewhere in the world does very little to bring them down here.

In Australia's context:

Rent inflation has been running hot due to a persistent housing undersupply, strong population growth (driven partly by record immigration), and the lag effect of fixed-term leases rolling over at much higher market rates.
Insurance premiums have surged, partly due to climate-related claims increasing the cost of underwriting risk.
Wages have grown at their fastest pace in over a decade — great for workers, but it increases business operating costs, which get passed on to consumers.

None of these forces switch off simply because the RBA raises the cash rate by another 25 basis points. That is precisely why Bullock is warning: the job is not finished.

The RBA's Forecasting Track Record

It is worth acknowledging that the RBA's inflation forecasting has been imperfect over this cycle — as it has been for most central banks globally. The bank initially characterised the post-pandemic inflation surge as "transitory," and rates stayed near zero longer than, in hindsight, they should have. That error contributed to inflation peaking higher and the subsequent rapid tightening cycle being more aggressive.

The RBA has since made institutional changes following the 2023 independent review of the bank, including restructuring its board and improving its communications framework. Bullock's tenure as governor reflects a more explicit commitment to forward guidance — telling borrowers and markets clearly what the conditions for future moves look like.

What the RBA's Rate Hike Cycle Has Done to Mortgages

Australia's cash rate rose sharply from a historic low of 0.10% in April 2022 to a multi-decade high through the tightening cycle. Each increase was passed on swiftly by the major banks — ANZ, CBA, NAB, and Westpac — to their variable-rate mortgage customers.

Worked Example: How a Rate Rise Affects Repayments

Let's make this concrete. Consider a borrower with a $600,000 owner-occupier mortgage on a 30-year principal-and-interest loan.

Cash Rate Change	Variable Rate (illustrative)	Monthly Repayment	Annual Repayment
Base scenario	6.00%	$3,597	$43,164
+0.25% hike	6.25%	$3,691	$44,292
+0.50% hike	6.50%	$3,787	$45,444
+0.75% hike	6.75%	$3,884	$46,608

Even a single 25-basis-point rise adds roughly $94/month or $1,128/year to this borrower's repayments. Two hikes would add more than $2,200 per year. For households already squeezed by cost-of-living pressures, that is a significant hit.

Use Dolaro's free Mortgage Calculator to model exactly how a rate change would affect your own repayments — just plug in your loan balance, current rate, and remaining term.

Who Is Most Exposed?

Not all borrowers face the same level of risk from additional rate hikes. Vulnerability depends heavily on your loan structure, your equity position, and your household income buffer.

Variable-Rate Borrowers

If your mortgage is on a standard variable rate, any RBA hike flows through almost immediately — typically within 30 days of the RBA announcement. This group has the most direct exposure and the least time to adjust.

Fixed-Rate Borrowers Approaching Rollover

Many Australians locked in ultra-low fixed rates of 1.5–2.5% during 2020–2021. Most of those fixed terms were two or three years long, meaning the bulk of those borrowers have already rolled onto much higher variable rates. However, anyone who locked in a three-to-five year fixed term more recently may still face a significant "fixed-rate cliff" when their term expires — potentially into an environment where rates are even higher.

First Home Buyers and Recent Purchasers

Borrowers who bought at or near the top of property prices in 2021–2022, using maximum borrowing capacity at low rates, may have the least financial buffer. A meaningful portion of their repayment goes to interest rather than principal in the early years, and they have had less time to build equity.

Investors with Interest-Only Loans

Investment borrowers on interest-only terms face the full rate increase on their entire outstanding balance, with no principal reduction cushioning the impact. Many of these borrowers have offset accounts or other structures — but those buffers have been drawing down over the tightening cycle.

What the RBA Is Watching: The Key Data Releases

Bullock's "data-dependent" stance means the following indicators are the ones to watch between now and the next rate decision:

Indicator	What the RBA Wants to See	Release Frequency
CPI (Consumer Price Index)	Inflation trending back to 2–3% target	Quarterly (monthly indicator available)
Wage Price Index	Wage growth moderating	Quarterly
Labour Force Survey	Unemployment edging up slightly	Monthly
Retail Trade	Consumer spending softening	Monthly
NAB Business Confidence	Business conditions normalising	Monthly

If CPI comes in hotter than the RBA's forecasts — particularly the trimmed mean inflation measure, which strips out volatile items and is the RBA's preferred gauge — a rate hike becomes substantially more likely.

What Can Borrowers Do Right Now?

Sitting back and hoping for rate cuts is not a strategy. Here are concrete steps Australian mortgage holders can take in response to Bullock's warning.

1. Review Your Current Rate

When did you last negotiate with your lender? Banks routinely offer sharper rates to new customers than they do to existing ones — the so-called "loyalty tax." Call your lender or use a mortgage broker to find out whether you are on a competitive rate for your loan-to-value ratio (LVR — the size of your loan compared to your property's value) and loan type.

2. Model the Impact of Further Rises

Before the next board meeting, work out exactly how much an extra 25 or 50 basis points would cost you per month. Use the Mortgage Calculator to stress-test your budget. Knowing the numbers removes some of the anxiety and helps you make a plan.

3. Consider Your Fixed vs Variable Decision Carefully

Should you fix now? This is one of the most common questions borrowers are asking. The honest answer is: it depends on your specific situation, and there is no universal right answer.

Arguments for fixing:

Certainty over repayments for a defined period
Protection if the RBA delivers further hikes
Easier budgeting for households with tight cash flow

Arguments for staying variable:

Variable rates have historically been lower than fixed over the long run
You retain the ability to make extra repayments without penalty
If the RBA cuts rates sooner than expected, you benefit immediately

Splitting your loan — putting a portion on fixed and a portion on variable — is a middle path that many lenders offer.

4. Build a Repayment Buffer

If you have an offset account (a savings account linked to your mortgage that reduces the interest you pay), now is the time to maximise it. Every dollar in offset reduces your interest exposure. If your lender allows it, redirect any discretionary savings into the offset rather than a separate savings account.

5. Review Your Household Budget

This sounds obvious, but many households have not done a genuine line-by-line budget review since rates started rising. Subscriptions, insurance renewals, and discretionary spending are all worth auditing. Freeing up an extra $200–$400 per month could be the difference between managing fine and falling behind on repayments.

6. Know Your Refinancing Options

Refinancing to a lower-rate lender can deliver immediate savings, but it is not free — discharge fees, application fees, and potentially break costs (if leaving a fixed loan) all need to be factored in. Use the Borrowing Power Calculator to check whether your current financial position would allow you to refinance, particularly if your property value has changed since you first borrowed.

The Broader Economic Context: Rate Hikes and the Housing Market

There is an inherent tension in the RBA's current position that Bullock herself has acknowledged. Rate hikes are designed to cool demand and reduce inflation — but they also squeeze mortgage holders directly, which is its own form of economic pain. The RBA is, in effect, using household budgets as the transmission mechanism for monetary policy.

Property Prices: The Wild Card

Conventional economic theory suggests that higher interest rates reduce property prices by limiting borrowing capacity. Australia's housing market has defied that logic to varying degrees over the past few years, supported by:

Structural undersupply — not enough new homes are being built to meet demand
Population growth — net overseas migration has kept demand for housing elevated
Investor demand — with rents high, investors have continued to enter the market despite higher borrowing costs

That said, affordability constraints are real. The Borrowing Power Calculator makes clear that at a 6.5% interest rate, a household earning a combined $150,000 per year can borrow significantly less than they could at 2.5%. That caps demand at some point.

The Risk of Over-Tightening

Central banks globally have wrestled with the risk of overcorrecting — raising rates so high that they tip the economy into recession rather than achieving a "soft landing." The RBA has been cautious about this, hiking more slowly than the US Federal Reserve (the American central bank) during the tightening cycle. Bullock's warning that further hikes are possible, rather than certain, reflects this balancing act.

If unemployment rises meaningfully — the RBA uses it as a proxy for demand destruction — the bank would have reason to pause or reverse course. The challenge is that inflation and unemployment can move in frustratingly different directions.

Frequently Asked Questions

What is the RBA cash rate currently?

The RBA cash rate is the benchmark interest rate set by the Reserve Bank of Australia at its board meetings. As of July 2026, the board's most recent decision and current rate are best confirmed directly on the RBA website, as the rate can change at any scheduled board meeting. Variable home loan rates are typically set 1.5–3% above the cash rate by individual lenders.

How often does the RBA meet to decide on interest rates?

The RBA board meets eight times per year following the 2023 institutional reforms (previously it met eleven times). Meetings are typically scheduled on the Tuesday following the first Monday of February, March, May, June, August, September, November, and December.

Will the RBA definitely raise rates again?

Not necessarily. Bullock's language was a warning, not a commitment. The RBA has consistently framed future decisions as conditional on the data. If upcoming CPI and employment figures show inflation moderating convincingly toward the 2–3% target band, the board may hold rates steady or even consider cuts. Further hikes become more likely if inflation remains elevated or re-accelerates.

How much does a 0.25% rate rise cost me on my mortgage?

That depends on your loan balance. On a $500,000 variable loan, a 25-basis-point increase adds roughly $78 per month in extra repayments. On a $750,000 loan, it is approximately $117 per month. Use the Mortgage Calculator to calculate the precise figure for your own balance and term.

Should I fix my mortgage rate now?

There is no single right answer — it depends on your financial situation, risk tolerance, and how long you plan to stay in the property. Fixing provides certainty but limits flexibility. Speaking to a licensed mortgage broker can help you model which option makes more sense given your specific circumstances.

What is the difference between the cash rate and my home loan rate?

The cash rate is the rate at which banks borrow money overnight from the RBA. Your home loan rate is the rate your lender charges you, which is set independently by the bank and typically sits well above the cash rate. However, when the RBA moves the cash rate, lenders generally pass that change on to variable-rate borrowers within a few weeks.

Does a rate hike always mean property prices fall?

Not automatically. Property prices are driven by supply, demand, population growth, and sentiment — not just interest rates. Australia has seen this dynamic clearly: rate rises have dampened borrowing capacity but persistent housing undersupply and population growth have supported prices in many markets. Individual markets, property types, and locations can diverge significantly.

Related Calculators and Guides

Mortgage Calculator — Work out how a rate rise changes your monthly repayments in seconds
Borrowing Power Calculator — Find out how much you can borrow at current interest rates
Usable Equity Calculator — Understand how much equity you can access for refinancing or investing
Rent vs Buy Calculator — Model whether buying or renting makes more financial sense in your market
Stamp Duty Calculator — Calculate the upfront cost of purchasing a property in your state

Mortgage rates and RBA cash rate information are current as at July 2026 and change regularly — always verify the current figure before acting.

This article is for general information only and does not constitute financial, tax or legal advice. Individual circumstances vary. Consult a registered tax agent or licensed financial adviser before making decisions based on this information.