RBA Governor Warns of Inflation Spike as Banks Launch Double Rate Hikes

Michele Bullock walked into a parliamentary hearing on a Friday morning in September and told Australia's elected representatives that the inflation nightmare was no longer theoretical. The Reserve Bank governor laid out the case plainly: the pressures everyone had been watching for were now showing up in the real economy. Within hours, Westpac announced it was raising fixed-rate home loan charges by as much as 0.45 percentage points—roughly double what a standard rate hike looks like. The bank's four- and five-year fixed terms climbed above 7 percent. Its five-year rate jumped from 6.69 percent to 7.14 percent. The two-, three-, and four-year terms each rose by 0.40 percentage points.

This was not an isolated move. NAB and ANZ had already lifted their fixed rates earlier in the month. CBA, the last of the big four banks still holding steady, was widely expected to follow within days. Thirteen lenders had already moved. What had started as a cautious trickle had become a stampede, with three of the four largest banks raising rates within a single 24-hour window. Sally Tindall, the insights director at Canstar, watched the pattern and saw panic setting in among lenders. "What started as a trickle of fixed rate increases has very quickly turned into a pile-on," she said. The message from the banking sector was unmistakable: something had shifted.

Bullock's testimony to the House of Representatives economics committee explained why. She told lawmakers that inflation triggers were actively materializing across the economy. The 75 basis points of rate hikes the RBA had already delivered this year might not be enough. With the central bank's next cash rate decision scheduled for September 29—just eleven days away—she was signaling that another move was coming. The pressures were real and multiple. Oil prices had spiked sharply, driven partly by conflict in the Middle East. The global artificial intelligence boom was pushing up costs. Severe weather events were driving up everyday prices. All of it was hitting Australian households at once. "Developments since then suggest that although growth in the Australian economy is slowing, some of these upside risks to inflation appear to be materialising," she told the committee. She warned that if these effects became embedded in how businesses and workers set prices and wages, inflation could become stubborn and require an even stronger policy response.

For people with mortgages, the math was brutal. Canstar's analysis showed that a single standard rate hike of 0.25 percentage points meant monthly repayments jumped by $91 on a $600,000 loan, $122 on $800,000, and $152 on $1 million. Westpac's double and near-double hikes meant the pain was arriving faster and deeper. Bullock acknowledged the squeeze directly. "I recognise that higher interest rates are difficult for Australians with mortgages who are also facing cost-of-living pressures," she said. But the inflation had to come down. There was no way around it.

The broader housing picture added another layer of strain. Prices in major cities had softened, but structural undersupply meant overall housing values remained roughly 50 percent higher than they had been in early 2020. First-home buyers were locked out. Existing homeowners were watching their monthly obligations climb. NAB's economists were already forecasting a 0.25 percent rate rise at the September 29 meeting—a scenario that looked increasingly likely after Bullock's public comments made clear the central bank was preparing to act. The question was no longer whether rates would rise again, but how much, how fast, and whether the banking sector's preemptive moves would be enough to contain the damage or whether they would simply be the first wave of a longer squeeze.