Rate Hike Hits Borrowers Hard, Economists Warn of Further Dampened Sales

The Reserve Bank of Australia (RBA) raised interest rates for the fourth time in 2026, hitting borrowers and small businesses hard. Economists and industry leaders weigh in on the impact of this rate hike, warning that it will further dampen sales and squeeze profit margins.

According to economist Louise Southall, 'the decision hits small business owners hard, compounding the impact of three previous rate hikes.' She notes that inflation is already affecting consumers' spending power, while businesses face increased debt repayments. This double squeeze on small businesses will deepen their pressure as higher rates force customers to redirect spending towards debt servicing.

Chief advocacy officer at Anglicare Sydney, Rob Stokes, emphasized that 'this rate rise will be felt hardest by people already living on the edge.' He pointed out that falling property prices lead to increasing rents, and people on low incomes have nobody left to pass the burden onto. The cost-of-living squeeze on middle Australia has a vice-like grip on those on the margins.

The latest hike could add around $90 to monthly home loan repayments for borrowers with a $600,000 variable rate mortgage, according to David Koch, economic director of Compare the Market. He advises borrowers to review their home loans and consider whether they are still competitive. Koch warns that households are getting hit at multiple levels: 'petrol pump, supermarket, and mortgage repayment.'

Australia is sleepwalking into a severe building and construction downturn, according to Denita Wawn, CEO of Master Builders Australia. The rate increase will prevent developers and builders from proceeding with some projects, while others may still go ahead but on a reduced scale. Combined with accelerated building materials prices and labor shortages, the cost of creating new homes far exceeds their likely selling price in many situations.