Key Highlights

  • Governor Bullock said some pain now will prevent even worse pain later.
  • The RBA's concern is that high Inflation expectations become embedded in price-setting.
  • Mortgage holders face higher repayments while house prices are falling and Unemployment is rising.
  • An illustration using hypothetical rates shows a quarter-point rise adding about $89 a month on a $550,000 loan.

Governor Michele Bullock's case for the November rate rise rests on a trade-off between near-term strain for borrowers and the risk of a longer, harder fight against inflation.

"Some pain now will prevent even worse pain down the track." Of everything Governor Michele Bullock said at her media conference on 3 November 2026, that sentence most directly addressed the people who feel a rate rise first: households with a mortgage.

The Monetary Policy Board had just raised the cash rate target by 25 basis points to 4.85 per cent, from 4.60 per cent. Six members voted for the increase and three voted to hold. Bullock's Job at the media conference was to explain why the majority judged that the cost to borrowers was worth bearing.

The "pain now" side of the ledger

The immediate cost of a higher cash rate falls on borrowers whose repayments move with interest rates. How much any individual lender passes on, and when, varies.

To give a rough sense of scale, here is an illustration. On a 30-year principal and interest loan, a hypothetical rate rising from 6.10 per cent to 6.35 per cent — a 0.25 percentage point increase — would change monthly repayments roughly as follows:

  • $350,000 loan: from about $2,121 to about $2,178, or about $57 more.
  • $550,000 loan: from about $3,333 to about $3,422, or about $89 more.
  • $900,000 loan: from about $5,454 to about $5,600, or about $146 more.

Repayments are not the only pressure. The RBA's November Statement on Monetary Policy observed that "housing prices have declined by more than expected", and that they "have declined further from their peak in March". Borrowers are therefore facing higher costs at a time when the value of the asset securing their Loan has been falling.

The labour market adds another dimension. "The unemployment rate rose by more than expected to average 4.6 per cent in the September quarter," the Statement said, and it is forecast "to rise to a bit over 5 per cent by end-2028." For a household, job security is often as important as the Interest Rate itself.

The "worse pain down the track" side

Bullock's argument is that the alternative — allowing inflation to stay high — would ultimately be more damaging. The RBA's inflation picture explains why it sees a risk:

  • Headline CPI was 3.9 per cent over the year to the September quarter.
  • Trimmed mean (underlying) inflation was 3.7 per cent over the same period.
  • The monthly CPI indicator, a separate measure, showed headline annual inflation of 4.3 per cent in the September month.

The Statement says "Headline inflation is expected to peak at 4.5 per cent in the December 2026 quarter", and that both headline and trimmed mean measures will "remain above 3 per cent until end-2027".

The deeper concern is persistence. "It is critical that we stop expectations for high inflation from becoming embedded in price-setting decisions," Bullock said. If businesses and workers come to expect high inflation, they may set prices and wages accordingly, which can make inflation harder to bring down later.

Deputy Governor Andrew Hauser pointed to evidence on this channel in his 5 November lecture. He cited a Macquarie University Business survey which found that firms expecting a faster return to target planned to pass on less of their Middle East conflict-related costs. In other words, what firms believe about future inflation can influence how much of their own cost increases they pass on.

Why oil is not the target

A natural question for Mortgage holders is why they should bear higher rates when much of the recent inflation impulse has come from fuel. Bullock addressed this directly. She said "we are not tightening monetary policy because of the direct impact of oil prices on inflation." She added: "Monetary policy cannot impact global oil prices."

The distinction is important for understanding the trade-off. The Board's aim is not to offset the oil price itself, which the Statement's Outlook chapter assumes is "35 per cent higher than assumed in August" in the December quarter. The aim is to stop that initial shock from spreading into broader, more lasting price increases through expectations.

Bullock summed up the priority this way: "Returning inflation to target is our priority, and we will do what is necessary to achieve that."

How well placed are borrowers?

The trade-off is easier to accept if borrowers can absorb the "pain now". The RBA's October 2026 Financial Stability Review offered some reassurance on that score, though its assessment came before the November decision.

It found the share of variable-rate owner-occupier borrowers with a cash-flow shortfall "increased a little over the first half of 2026, but remains relatively low at around 2 per cent." The median borrower can cover "over a year of scheduled mortgage payments at current interest rates" from buffers, and "less than 1 per cent of borrowers" were estimated to be in negative equity.

The Review judged that "Most borrowers appear well placed to manage ongoing cost pressures amid declining housing prices." It also cautioned that there is "no room for complacency."

Those figures describe the median and the aggregate. Individual circumstances differ, and a borrower with a small buffer or a recently purchased home may experience the trade-off very differently from the typical case.

The bottom line

Bullock's "some pain now" framing is a judgement about timing. The Board accepts that higher rates add to the strain on mortgage holders today, at a time of falling housing prices and rising unemployment. Its bet is that acting now reduces the risk of high inflation becoming entrenched, which it sees as the larger threat. The RBA's own October review suggested most borrowers entered this period with buffers in place. Whether the trade-off proves worthwhile will become clearer as inflation data arrive, starting with the October monthly CPI indicator on 25 November, ahead of the next decision on 8 December.