Most rate rises are a response to something happening here at home.
Households spending too freely. An economy running hot. Wages growing faster than productivity.
This time, there’s another major factor in the mix.
The Reserve Bank is widely expected to lift the cash rate on Tuesday 29 September, with all four major banks forecasting an increase to 4.60%.
One of the big reasons expectations have shifted is sitting thousands of kilometres away.
Oil prices have surged amid the ongoing conflict in the Middle East, adding another source of inflation pressure to an Australian economy where underlying inflation is already too high.
Which is worth understanding, because it helps explain why something happening on the other side of the world can eventually show up in your own household budget.
First, what is the cash rate?
It’s worth a quick refresher because the cash rate gets talked about constantly and explained surprisingly rarely.
The cash rate is the interest rate charged on unsecured overnight loans between banks. The RBA sets a target for that rate as its main tool for influencing economic activity and inflation.
It isn’t your home loan rate, and it isn’t your savings rate. But it is the base that sits underneath both.
When the RBA moves the cash rate target, banks often adjust their own rates in response — although not always immediately, and not always by the same amount.
That can flow through to mortgages, personal loans, savings accounts and term deposits. From there, it affects how much money households have available to spend or save.
That flow-on is the point.
The RBA raises rates to reduce demand and help bring inflation under control. It lowers them when it wants to provide more support to spending and economic activity.
The cash rate is the main lever it has.
What’s expected on Tuesday
The cash rate is currently 4.35%.
Right now:
- All four major banks now expect a 0.25 percentage point rise to 4.60%
- ANZ has gone further, forecasting a second rise in November that would take it to 4.85%
None of that guarantees what the RBA will do, but governor Michele Bullock has said some of the inflation risks the RBA has been watching appear to be materialising.
How does a barrel of oil reach your household budget?
Bullock explained the mechanism fairly plainly when she appeared before a parliamentary committee on 18 September.
Higher oil prices lift inflation directly, through what you pay at the petrol pump. But they can also work indirectly: businesses facing more expensive freight, energy and other inputs may pass some of those higher costs through to the price of other goods and services.
So the effect doesn’t stop at the bowser. It turns up in what you pay for groceries that had to be trucked somewhere, for anything made from plastic, for services delivered by businesses whose own costs have risen.
That’s why an energy shock becomes a general inflation problem — and why the RBA responds to it with the one tool it has, even though interest rates can’t do a thing about the price of crude.
Australia isn’t alone in this
This isn’t just an Australian problem.
Other central banks are wrestling with renewed inflation pressures too.
On 16 September, the US Federal Reserve increased its benchmark interest rate by 0.25 percentage points. The International Monetary Fund has also urged the RBA to maintain a tightening bias and remain ready to raise rates further if inflation pressures persist.
Bullock has also acknowledged the obvious human cost. Higher rates are difficult for households with mortgages, particularly when they’re already dealing with cost-of-living pressures. But she has stressed that bringing inflation down remains essential.
What it means depends on where you sit
If you’re paying off a loan. If the RBA raises the cash rate by 0.25 percentage points and your lender passes it through, variable loan repayments are likely to rise. And if ANZ is right about another increase in November, it’s worth knowing now what two rises would do to your monthly cash flow rather than finding out once they arrive.
If you’re saving. Higher rates can mean better returns on savings accounts and term deposits. But banks pass increases through unevenly, and many of the highest advertised savings rates come with conditions attached. If your money is sitting in an account you opened in a very different rate environment, it may be worth checking what you’re actually earning.
If you’re renting. Interest rates can reach the rental market indirectly through landlord financing costs, investor activity and housing construction — alongside much bigger influences such as supply, demand and policy. Slower and harder to isolate than a mortgage repayment, but real.
If you’re simply trying to keep the budget together. This is where the oil story becomes particularly relevant. Fuel and energy are inputs into a huge number of things households ultimately pay for. So your budget can come under pressure even when you haven’t suddenly started spending more.
The part you can actually control
You can’t control the price of oil, and you can’t control what the RBA decides on Tuesday.
What you can do is know where you stand before it happens.
Before the announcement, it’s worth spending a few minutes in Moorr reviewing your income and regular expenses, your loan repayments, your cash buffers and your overall position — and asking yourself: Does this still work if rates rise once more? What about twice?
You might find the answer is yes and nothing needs to change. Or you might spot an expense that’s crept up, a buffer that could use rebuilding or a goal whose timing needs another look. Either way, knowing your own numbers beats trying to perfectly predict someone else’s decision.
And if reviewing your numbers raises the bigger question of “Is my loan still competitive?”, head to the Professional Services tab in Moorr to connect with a mortgage broker who can review your current setup.
Join us LIVE on Tuesday
Ben Kingsley and Evan Lucas will be live on YouTube ahead of the 2:30pm AEST announcement on Tuesday 29 September.
Ben Kingsley is a co-creator of Moorr and co-host of The Property Couch. Evan Lucas is a behavioural economist and author of Mind Over Money, a book that explores the gap between what the numbers tell us and what we actually do with them.
Here’s how the session will run:
- Before the announcement — what’s changed since the previous meeting, what the latest data is showing, and where Ben & Evan think the Board will land.
- At 2:30pm AEST — the decision live as it lands, with the RBA’s statement unpacked in real time.
- After the announcement — the wider picture, including inflation and cost of living, the labour market, household spending, borrowing conditions, the property market, and global economic developments.
Set a reminder and watch LIVE →
If the video above hasn’t refreshed by 2pm, refresh the page or head over to the Empower Wealth YouTube channel to join the live discussion.
Can’t make it live? The replay will be available afterwards. But watching Ben and Evan interpret central bank language in real time is considerably more entertaining than it sounds.
