RBA Defends Rate Hikes Amid Concerns Over Global Financial Risks

RBA Governor Michele Bullock has defended the latest interest rate hike, stating that it's necessary to combat high inflation. The Reserve Bank of Australia (RBA) has increased interest rates for a fourth time in 2026, taking them to their 15-year high of 4.6 per cent.

According to the RBA's half-yearly Financial Stability Review, less than one per cent of borrowers are estimated to be facing negative equity despite soaring interest rates. The review found that most Australians have sufficient cash flow and savings to mitigate downturns in the market.

The report noted that housing prices could fall 20 per cent from current levels, but only around five per cent of mortgages would fall into negative equity. This is based on RBA modelling, which suggests that even a significant decline in house prices would not have a major impact on the financial stability of most Australians.

The review also highlighted some risks to Australia's financial system, including high sovereign debt internationally and increased reliance on borrowed cash amongst creditors. However, it noted that these risks are currently 'contained' and do not pose a significant threat to financial stability.