The Reserve Bank has lifted the cash rate to 4.1% following a divided vote among board members, with five supporting the increase and four opposed.
The rate rise has sparked immediate concerns about Australia’s housing crisis, particularly in Tasmania where supply shortages are acute.
Benjamin Price from the Housing Industry Association’s Tasmanian division said the increase would worsen housing affordability by reducing construction.
“Higher interest rates mean fewer homes get built, and that only makes the housing shortage worse,” Price told Pulse.
“You can’t fix housing affordability by making it harder and more expensive to build homes.”
Price said Tasmania faced particular risks given its tight housing market and regional construction challenges.
“In Tasmania, higher interest rates risk slowing new home construction at exactly the time our housing shortage is most acute,” he said.
He said every increase in borrowing costs made delivering new homes harder, especially in smaller regional markets.
“When fewer homes are built in Tasmania, pressure immediately flows through to higher rents and house prices,” Price said.
Price called for the Tasmanian government to maintain its First Home Owners Grant, which is due for reduction on July 1.
“The RBA’s announcement today only adds to the urgency behind maintaining the Tasmanian Government’s First Home Owners Grant,” he said.
He argued policy changes would be more effective than rate rises for improving affordability.
“Reducing red tape and speeding up approvals would do far more for affordability than squeezing housing investment,” Price said.
Earlier today, Tasmanian Treasurer Eric Abetz had been pointing to new data showing 81 households had accessed the state’s “boosted” First Home Owner Grant.
He said since 2014, almost 8,000 Tasmanians households have been assisted in the purchase of their first home through the grant.
The state government tripled the program to $30,000 in 2025-26.
“By offering these incentives, we’ve helped Tasmanians into their first home sooner,” Abetz said.
“This delivers greater security and is an investment in our young people’s future.”
Reserve Bank Governor Michele Bullock said inflation was already problematic before recent Middle East tensions drove up petrol prices.
“Higher petrol prices will add to inflation, but they’re not the reason for today’s decision,” Bullock said after the announcement.
“Inflation was already too high, reflecting the fact that demand is outstripping supply.”
She said higher fuel costs alone wouldn’t be enough to slow demand and address the underlying inflation pressures.
