The Reserve Bank lifted the cash rate by another 0.25 percent this week, taking it to 4.35 percent. It is the third hike of 2026 and it fully unwinds the easing cycle from last year. The decision was eight votes to one.
If you have a mortgage, the headline is straightforward. The average loan size in Australia is now $736,259, and Finder estimates this year's hikes alone have added around $2,657 a year to repayments. About 297,000 mortgagors told Finder they would default if they were hit with one or two more.
So far, that is the part everyone agrees on. The cost has gone up and households are feeling it. The interesting question is the one no one in Canberra seems keen to answer plainly. Why?
The official answer
The Reserve Bank Governor, Michele Bullock, points to two things. The first is sticky inflation. The headline Consumer Price Index hit 4.6 percent in the year to March 2026, the highest reading since September 2023. The trimmed mean, which is the measure the RBA actually targets, sat at 3.3 percent, still above the 2 to 3 percent band.
The second is global energy prices. Petrol jumped 32.8 percent in March alone, with transport costs up 9.2 percent in a single month. Treasurer Jim Chalmers has been blunt about the cause, telling Bloomberg that the fallout from the war in the Middle East is "already serious and it risks becoming severe". His own Treasury modelling suggests inflation could reach 5 percent if oil stays elevated.
When pressed on whether government spending was adding to the problem, Bullock pushed back. In a Senate hearing earlier this year, she said the key driver of the revised inflation forecast "is not fiscal policy" but "private demand". When questioned again, she sighed and said, "I really don't think I've got anything more to add on this." That is the official line. The war did it, private demand did it, and the rest is not up for discussion.
"Inflation is high. It's too high, and it's going higher. I think the RBA just have to act and be open about it too."
Reading between the lines
There is another reading. It is not popular, and it does not get much airtime, but the data behind it is publicly available.
Mark Bouris, the chairman of Yellow Brick Road, has been making the case for over a year. His view is mechanical rather than political.
"Governments stepped in during Covid and spent aggressively, and fair enough at the time. But the key point is, they never really stopped. If you increase the amount of money in the system, but you don't increase the amount of real output at the same pace, each dollar buys less."
You can decide for yourself whether that holds up. Here is what the publicly available numbers say.
The federal public service is at a record high
The Australian Public Service Commission's own data shows 198,529 staff at 30 June 2025. That is an increase of 13,671 in a single year, or 7 percent. It exceeds the 1987 record. The 2025 to 2026 federal budget projects another 4,199 on top of that.
The total Australian public sector employs roughly 2.6 million people
That is the ABS Public Sector Employment figure for 2024 to 2025, covering Commonwealth, state, and local governments. State governments alone employ close to two million Australians. The total public sector wage bill came in at $249.5 billion last financial year, up 7.6 percent in twelve months. To be clear, this counts government employees. NDIS recipients and most NDIS support workers are not in this number.
The NDIS has blown past its original projection by 72 percent
In 2023 to 2024, the NDIS cost $42 billion. That was 72 percent more than the 2020 to 2021 Budget had projected for the same year. The scheme will spend $46.2 billion this year and is projected to reach $58 billion by 2028. Average annual growth was 24 percent for the four years to 2023 to 2024. The Parliamentary Budget Office has flagged it as one of the largest structural pressures on the federal budget.
Federal spending today is at a high-water mark, and still climbing
Look at the most recent Budget. Total federal expenditure in 2024 to 2025 is $734 billion, or 26.6 percent of GDP. That is up $43 billion in a single year compared with 2023 to 2024, a 6.2 percent nominal increase. The public sector wage bill alone reached $249.5 billion in 2024 to 2025, up 7.6 percent year on year (ABS). For historical context, Treasury's own paper notes that across the 2002 to 2013 decade, federal spending grew 27 percent faster than GDP, with the post-GFC stretch running 47 percent faster. That is the pattern that produced today's elevated baseline.
The 10-year picture: nearly double the spend
The clearest way to see this is to look at our own ledger over a decade. In 2014 to 2015, the Australian Government's Final Budget Outcome reported total federal expenses of $417.9 billion, or 25.9 percent of GDP. The 2024 to 2025 Budget reports $734 billion, or 26.6 percent of GDP. As a share of the economy the line has barely moved. In dollar terms it has nearly doubled. The composition has changed too. The NDIS line has gone from effectively zero to $46 billion. The renewables and energy transition line has gone from a modest grants program to $22.7 billion a year. Public sector wages have gone from one figure to $249.5 billion.
None of those numbers are contested. They come from the APSC, the ABS, the PBO, and Treasury itself. What is contested is what they mean.
If you take the Bullock view, government is just one component of aggregate demand, the size of it does not really matter, and the lever to pull is interest rates. If you take the Bouris view, public spending of that scale puts a floor under demand that interest rates have to fight harder and harder to push down. The household with a mortgage gets the bill either way.
Where the money is, and isn't
There is a flip side to the spending question that gets even less airtime. While the household with a mortgage is asked to absorb another $2,657 a year, the government is writing very different cheques somewhere else.
Take gas
Australia is one of the world's largest LNG exporters. Around 70 percent of that gas is extracted from Commonwealth waters, which means the federal government owns the resource. In 2024 to 2025, the federal Petroleum Resource Rent Tax collected just $1.42 billion. To put that in perspective, Norway taxes its oil and gas exports at 78 percent on profits and has built a sovereign wealth fund now worth roughly $1.9 trillion. The Australia Institute estimates the total Australian public take from our gas is around 7.7 percent of what Norway extracts from comparable resources.
Take green spending
The 2024 to 2025 federal budget allocated $22.7 billion to renewable energy, including $13.7 billion in production tax credits for hydrogen and processed critical minerals. The Capacity Investment Scheme is targeting $65 billion in clean-energy investment that the public will underwrite in part. Over the ten years to 2022 to 2023, Australian taxpayers and electricity customers paid an estimated $29 billion in renewable subsidies, averaging $2.6 billion a year. Whether you support those programs or not is a separate question. The point here is the size and direction of the cheque.
Stack the two side by side. The government collects $1.42 billion in resource rent from a 70 percent share of the country's largest export commodity, then writes a $22.7 billion cheque to a different industry the same year. When inflation runs hot, it asks the household with a mortgage to absorb the difference through higher rates.
And much of the green spend has not landed
The renewables ledger is not a clean ledger. A growing list of flagship green-energy projects, backed by hundreds of millions or billions in commitments, have collapsed, been deferred, or been quietly archived in the past 18 months. Below are four of the most recent examples, all sourced from non-mainstream specialist outlets.
Bouris's "they never really stopped" line points at one half of that picture. The half he doesn't quite get into is who is paying. The Reserve Bank's blunt instrument, monetary policy, lands hardest on the third of households that carry a mortgage. The choices about where the public dollar goes, and where it doesn't, are made somewhere else.
What this means for your home and your rent
Most of the conversation around rates assumes property prices will fall. That is not what the latest data shows.
Cotality's April 2026 Home Value Index has national values up 2.1 percent for the March quarter and up 9.9 percent for the year. The national figure hides a market that has split apart. Sydney was down 0.2 percent for the quarter and Melbourne down 0.6 percent. But Perth is up 24.3 percent for the year, Brisbane up 19.0 percent, Darwin 19.7 percent, and Adelaide 11.4 percent. Auction clearance fell to 52.7 percent in late March, the lowest since July 2022.
Different markets cycle at different times. That is not a slogan, it is what the numbers actually do.
The rental side is where this gets pointed. National rental vacancy was 1.0 percent in April. New listings were 3.3 percent below a year ago and 6.1 percent below the five-year average. Total advertised supply was 11.5 percent below a year ago. When borrowing costs rise and supply stays tight, investors do not absorb the cost, they pass it on. Rents climb. First home buyers who were planning to buy this year keep renting, and the queue at every open inspection gets longer.
The practical effect of this rate cycle, on the ground, is more likely to look like stagnating prices in the most stretched capitals, continued growth in the smaller capitals where supply is genuinely tight, and rents grinding higher almost everywhere. That is a harder story to write a headline about than "property crash", which is probably why you are not seeing it written.
What to actually do
Our friends at Professional Lending Solutions put it well in this week's broker note.
"It's a timely reminder to make sure your loan is still working as hard as it should for you. Whether you're a homeowner or investor, we can help you understand your options and make a plan that suits your goals."
That is the practical bit. If your rate starts with a six or a seven, or you have not reviewed your loan in two years, this is the moment to look at it. Hikes get passed on within weeks. Refinances do not happen on their own.
The bigger picture is what we keep coming back to in this column. Time in the market beats timing the market, and skip the BBQ advice. The macro picture is loud, the headlines are louder, and most of the people offering opinions over a sausage on Sunday are not the ones writing the cheques on Monday. Look at your own numbers, and look at what is actually selling in your suburb (not what is leading the news). Then read between the lines on who is asking you to absorb the cost of decisions you did not make.
The next RBA decision is on 16 June. The Federal Budget on 12 May is the one to watch closely, with capital gains tax and negative gearing already moving investor behaviour. We will keep you posted.
The hotLister take
Rate hikes do not crash property markets. They redistribute the pain. Mortgage holders pay more, renters pay more, supply stays tight, and the smaller capitals keep running. The question is not whether prices fall. The question is who is being asked to carry the cost of the inflation problem, and whether that is fair given where the money is, and isn't, going.
