Discussing the impact of September's rate rise, Governor Michele Bullock pointed to a less visible feature of Australian household finances: the money parked in mortgage offset accounts.

Household debt in Australia is usually discussed in gross terms: how much is owed, how fast it is growing and how much of household income goes on repayments. At her media conference on 29 September 2026, after the Reserve Bank of Australia (RBA) raised the cash rate target by 25 basis points to 4.60 per cent, Governor Michele Bullock drew attention to the other side of the ledger.

"a lot of people have a mortgage, and then they have an offset account, which sits in the background", she said. And, she added, "the amount of money in those offset accounts has actually grown quite a lot over the last decade or so."

It was a brief remark, but it goes to the heart of a question that matters for both monetary policy and financial stability: how much room do indebted households really have when rates rise?

Why the background matters

An offset account is a deposit account linked to a home loan, where the balance is set against the loan when interest is calculated. Money held there is, in effect, available to the household while also reducing the interest it pays. That dual role is why Bullock's phrase is apt. The balance does not appear in measures of debt outstanding, but it shapes how exposed a borrower is to a higher rate.

Bullock's remarks came in the context of explaining how rate rises reach households. She did not soften the impact: "Those who have mortgages, yes, this clearly impacts them and it hurts them." The cash-flow effect, she said, is that "they've got less cash flow, and they've got less money to spend on things", although she described it as only one of several channels. According to the RBA's research, she said, "the most important channel is the exchange rate channel."

The offset point adds a layer of nuance. A borrower with a substantial offset balance and a borrower with none may hold mortgages of the same size, yet face very different pressures when repayments rise.

Debt on one side, buffers on the other

The gross numbers show household borrowing still growing, if more slowly. The RBA's Financial Aggregates for August 2026, released on 30 September, showed:

  • housing credit up 0.4 per cent in the month and 7.3 per cent over the year
  • personal credit up 0.7 per cent in the month and 5.1 per cent over the year
  • total credit up 8.4 per cent over the year, with business credit leading at 10.9 per cent

The burden of servicing that debt has climbed. Assistant Governor (Financial Markets) Christopher Kent said on 13 August, when the cash rate was 4.35 per cent, that "Scheduled mortgage payments have risen and are now close to their 2024 peak as a share of household disposable income." Since then, the cash rate has risen again, taking total tightening in 2026 to 100 basis points.

Kent also observed that lending and deposit rates have risen and that housing credit growth has slowed. The Board's September statement said new housing loans have declined noticeably.

On the buffer side, the RBA's October 2026 Financial Stability Review, released on 1 October, gives the clearest read on buffers. It found the share of variable-rate owner-occupiers with a cash-flow shortfall "remains relatively low at around 2 per cent", and that most of those in shortfall have savings to cover it for at least six months. The share in severe stress, it said, "will remain well below its 2024 peak".

Other findings help fill in the picture. Real household disposable income per capita declined slightly over the first half of 2026 but remains higher than its 2023 and 2024 averages. Negative equity is currently below 1 per cent of borrowers. The share of high loan-to-valuation lending has risen since the expansion of the Government's 5% Deposit Scheme, but "remains low overall".

Assistant Governor (Economic) Sarah Hunter, speaking on 14 September, put the average position this way: "the average household, actually, with a mortgage, for example, looks pretty well-placed as well".

What is and isn't known

Bullock's comment is qualitative, and the available record has limits:

  • Known: the Governor says offset balances have "grown quite a lot over the last decade or so".
  • Known: most borrowers in cash-flow shortfall have savings to cover it for at least six months, according to the review.
  • Not known: how the latest increase, effective 30 September, will change those balances over time. Bullock told a parliamentary committee on 18 September that monetary policy works with a lag and the full effects of recent rises were not yet visible.

That last point matters. A buffer that sits in the background can also be drawn on quietly, and averages can mask households with little or nothing set aside. Hunter acknowledged as much: "for many members of the community, it's a tough time".

The policy angle

Offset balances also bear on how monetary policy works. One implication, not one spelled out in the remarks cited here, is that where borrowers can absorb higher repayments from savings, the cash-flow channel may operate more gradually. Bullock, in any case, stressed it is only one channel among several. The Board's aim remains returning inflation to the 2–3 per cent target. Headline CPI inflation was 4.0 per cent over the year to August, while underlying inflation was, in Bullock's words, "about 3.5 per cent for the past six months".

The next decision is due at 2.30 pm on 3 November. Bullock has said: "I'm not going to give you forward guidance."

The bottom line

Bullock's offset remark is a reminder that the household debt picture has two sides. Debt continues to grow and repayments are near their earlier peak as a share of income, but many borrowers also have an offset account "which sits in the background", and the Governor says those balances have grown substantially over the past decade. The Financial Stability Review suggests buffers are cushioning most households for now. What the available material does not reveal is how evenly those buffers are spread, or how long they will last.