The decision will likely impact variable rate mortgage holders, with two thirds of 2025’s easing now wiped from play due to stubborn inflation and energy price risks.
Five of the RBA board's nine members voted to hike the cash rate by 25 basis points, lifting it back to 4.10% - where it was just seven months ago.
“Information since the February meeting suggests that some of the increase in inflation reflects greater capacity pressures,” the board said in a post-meeting statement.
“The conflict in the Middle East has resulted in sharply higher fuel prices, which, if sustained, will add to inflation.”
It comes in the wake of weeks of shifting expectations, with Australia’s big four banks altering their outlooks on the March meeting less than a week ago to pencil in predictions today’s hike would come to fruition.
“The domestic data flow since the February meeting has confirmed that higher interest rates are needed,” CommBank head of Australian economics Belinda Allen said on Wednesday evening.
She also said that, while conflict in the Middle East presented an “uncertain backdrop” to Tuesday’s RBA meeting, she expected inflation to drift further from the RBA’s 2% to 3% per annum target due to higher fuel costs, while the impact on growth remains “highly uncertain”.
Meanwhile, Westpac chief economist and former RBA assistant governor Luci Ellis said that, while any impact fuel prices may have on inflation will be temporary, the RBA “will nevertheless feel compelled to react”.
“[The board] has not changed its pessimistic view of growth in supply capacity following the national accounts, even though data revisions, consumption and unit labour costs paint a more benign picture,” Ms Ellis continued.
“In addition, it has signalled a willingness to respond to the spike in headline inflation to head off a sustained rise in inflation expectations.”
The recent data flow has seen inflation remaining stubborn, the jobs market remaining tight, and economic growth at a two year high.
While that all may sound good, it seeds the ground for price growth, which causes significant and long-term financial pain for households.
March RBA rate hike: What mortgage holders should know
With the RBA lifting the cash rate again in March, the effect is already flowing through to home loan interest rates - and for many borrowers the change won’t feel subtle.
The reductions delivered during the 2025 cutting cycle likely allowed many households to build a small repayment buffer by not proactively lowering repayments, but today’s increase will erode that.
Westpac remains the only major bank that automatically adjusts minimum repayments down after cuts, meaning ‘set-and-forget’ Westpac customers may be more exposed to rate rises.
The latest move also widens the gap between where mortgage rates sat late last year and where they’re now headed.
When the cash rate previously held at 4.10%, typical outstanding variable rates hovered around 6.10% p.a., compared with roughly 5.50% p.a. before the RBA’s February hike.
With March’s increase layered on top, borrowers are now likely facing meaningfully higher interest charges than they were only a few months ago.
For households with an average new owner‑occupier loan - about $736,000 - on a 30‑year term, the combined effect of the February and March rises may translate to roughly $280 more per month, pushing repayments to around $4,460.
How could a rate hike impact your repayments? Mortgage Repayment Calculator
With interest rates likely on the move, now could be a good time for variable rate mortgage holders to compare their new rate against some of the lowest offered on the market.
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