The Reserve Bank of Australia’s (RBA) recent decision to lift the cash rate by 0.25% to 3.85% has reignited concern that monetary policy is worsening the housing crisis by further constraining housing supply and affordability.
The Australian Council of Social Services (ACOSS) CEO Cassandra Goldie said on February 4 that the latest rise would disproportionately affect lower-income households, many of whom already spend a larger share of their income on essential costs.
Goldie said governments must do more to address the structural drivers of inflation and housing affordability, rather than relying only on RBA rises to curb inflation.
“Governments can and should take further action to bring down costs for people doing it tough including by further reducing out-of-pocket specialist and dental care costs as well as child care and aged care fees, capping rent increases, and covering solar subsidies on consumers’ power bills. This would help prevent further rate rises,” Goldie said.
She said governments must do more “to directly reduce prices” but that “major spending cuts would have little impact on inflation and only hurt those with the least”.
ACOSS is recommending governments do more to curb excessive rent rises, which rose by 3.9% over the year to December 2025 and would have risen by 4.2% without increases in Commonwealth Rent Assistance.
It said the federal Labor government should also reduce upward pressure on housing prices by “curbing excessively generous property investor tax breaks which fuel demand”.
Skyrocketing power bills add further pain to those struggling with rising cost of living costs.
Late last year the Anthony Albanese Labor government quietly dumped the quarterly electricity rebate scheme, which economists had previously credited with helping to curtail electricity price rises and drive down inflation and interest rates all while raising taxpayer-funded subsidies to the fossil fuel industry.
Even industry groups representatives such as the Real Institute of Australia (REIA) President Jacob Caine said on February 3 said the decision risks undoing housing affordability improvements over the past year, largely driven by interest rate cuts. They warn that higher borrowing rates are already dampening housing investment. The REIA analysis also casts doubt on Labor’s ambition to deliver 1.2 million new homes over five years.
Thanks to the systematic destruction and sell-offs of public housing, the government’s ability to deliver on its housing plan relies heavily on voluntary private sector participation.
Mortgage holders continue to feel the strain, with banks passing on the full rate increase to borrowers at the earliest opportunity.
For many households already facing rising energy, grocery, insurance, transport and utility costs, the additional repayment burden is pushing families and budgets to breaking point.
Those who are able to save are not seeing equivalent improvements in deposit rates, adding to the frustration and anger.
The latest RBA rate rise highlights a growing tension between monetary and housing policies. While governments attempt to boost housing supply through planning reform and investment, higher interest rates and living costs are pulling in the opposite direction.
As quarterly CPI data continues to track the disproportionate costs of energy and other essentials and pressure mounts on households and the construction sector alike, calls are growing for government and the RBA to modernise its approach and recognise housing as not only a human right, but also a driver of inflation and a casualty of current policy settings.