The Inflation Tax · Part 1
The $300 Question
What RBA rate rises really cost your mortgage, who pays to fight inflation, and who gets paid.
Opinion and general information only, not financial advice. Scott, Charlene and FMA are fictional.
An extra $323 a month, and nobody asked you.
Meet Scott and Charlene. They bought a modest three-bedroom home on Ramsay Avenue in Modbury, in Adelaide's north-east, with a $500,000, 30-year variable loan. Nothing flashy, just a place to raise two kids and their dog, Bouncer.
At the start of 2026, their rate sat around 5.6%. They paid about $2,870 a month. Then the Reserve Bank of Australia (RBA) raised the cash rate four times in a single year, a full 1 percentage point, landing at 4.60% in September.
Their bank, Fat Margin Australia (FMA), passed it on. Their rate is now around 6.6%, and their repayment is about $3,193 a month.
That is $323 more every month, or about $3,875 a year. That money no longer goes to school shoes, the footy club or Bouncer's vet bills. That is exactly what the RBA intended.
So here is the $300 question: Scott and Charlene are paying to bring inflation down for the whole country. Who is paying alongside them, and who is getting paid?
Example figures: principal and interest, 30 years, full pass-through of the 2026 rate rises.
The short answer
About one in three households is paying for the whole country's fight against inflation. Everyone else is shielded, or even better off. And while those families tighten their belts, their bank can quietly loosen its own.
Three things show why.
1. Mortgage holders feel it first, fastest and in full
The RBA never touched Scott and Charlene's loan. It moved the cash rate, the baseline price of money (what is the cash rate?). FMA chose to follow, lifting their variable rate within about two weeks. Savings rates moved later, and by less.
At the last Census, 35% of Australian households had a mortgage (ABS). Every one of those on a variable rate pays more, every month, with no say in it.
The strain shows. Government figures show more than 40% of mortgage households have been in housing stress every year since 2022–23 (YourLifeChoices).
2. Everyone else is shielded, or even better off
Now look at the other households:
- Outright owners (31%) often hold savings. Higher rates mean more interest income, not less.
- Renters feel some pain when landlords pass on costs, but it arrives slower and patchier.
None of this makes savers villains. But the national job of cooling inflation falls mostly on one group: younger families with big loans. They often have the least budget room. Economists call the cash rate a blunt tool for this reason. It works, but it shifts the cost onto those who owe the most.
3. While families tighten their belts, the bank loosens its own
Here's the cheeky part. The RBA raises rates so households spend less. Nobody asked the banks to earn more. And some of the money behind Scott and Charlene's loan was likely raised years ago at a fixed rate by their bank. Banks often hedge this, but when they don't, a rate rise lifts repayments while that cost stays put. The way a rate rise flows through to lenders is layered with ice-cream magic.
Banks run at two speeds:
| How fast it moves | How far it moves | |
|---|---|---|
| Scott and Charlene's loan rate | Within about two weeks | The full rise |
| Savings account rates | Weeks or months later | Often less than the full rise |
| Term deposits already held | Not until they mature | Locked at the old, lower rate |
| Bonds sold to investors at a fixed rate | Not until they're repaid | Usually partly offset by hedging |
The gap between those two speeds has a name: margin expansion. The bank charges borrowers more straight away, while much of its own cost of money stays low for a while.
An illustration. Say FMA passes the full 1% on to Scott and Charlene, but its own cost of money rises only about 0.6% in the first year. Of their extra $323 a month, roughly $194 covers FMA's higher costs. The other $129 a month is extra margin: about $1,550 a year from one family on Ramsay Avenue. Now multiply that across every street in Australia. (Hypothetical figures, for illustration.)
To be fair, banks say rising costs and bad debts eat into this, and big-bank margins have stayed roughly flat across 2026. But a steady margin on a bigger loan book still pays handsomely. Commonwealth Bank reported an $11 billion annual profit, up 7% (Motley Fool). The fight against inflation is hurting households. It isn't hurting the country's biggest bank.
So, is it fair?
Australia has fought inflation the same way for decades: raise the cash rate and wait. That approach was designed when mortgages were much smaller relative to incomes. Today a 1% move bites much harder.
If the whole country benefits from lower inflation, should the whole country share the cost? Or is it reasonable for one in three households to carry most of it, while the extra interest flows to lenders?
There may be better dials to turn. Some economists have floated using superannuation to cool spending. Others point to tax measures returned as services. We explore both later in this series.
Mortgage holders are told to tighten their belts for the national good. Their lender is free to loosen its own. If fighting inflation is a national sacrifice, should anyone profit from it?
This article is general information and the author's opinion. It doesn't consider your personal circumstances. The author is not a licensed financial adviser. Before making financial decisions, speak with a licensed professional. Figures are illustrative.