On February 3, 2026, the Reserve Bank delivered its first rate hike of the year. The cash rate rose by 25 basis points to 3.85% .
This decision was made before the Iran war began. Before oil prices spiked. Before the Strait of Hormuz became a war zone. Before any of the “global uncertainty” that would later be cited as justification.
The February Decision – What the RBA Saw :
Metric Value
Headline CPI (December quarter) 3.6%
Underlying Inflation 3.4%
RBA Target Band 2-3%
Unemployment Lower than expected
Private Demand Stronger than expected
Governor Michele Bullock’s media conference on February 3 revealed the true basis for the decision:
“The recent run of data gives the Board a clear enough view that the underlying pulse of inflation is too strong. We’ve updated our assessment and outlook for the economy and concluded that the cash rate was no longer at the right level to get inflation back to target in a reasonable timeframe.”
The admission that matters:
“The pick-up is due to a combination of factors across a broad range of components and sectors. Our updated view, driven by the latest data is that demand was stronger than expected over the second half of 2025 and we think some of that strength has carried into 2026.”
But critically, Bullock also admitted that some of the inflation was “temporary” :
“Theres some sectors that we think maybe the inflation is going to ease off a little bit there but theres enough persistence in what we saw, it was pretty broad based market services again are still quite strong.”
The RBA hiked rates based on 3.6% CPI, knowing that part of it was temporary.
For the low-paid worker earning $948 per week, what did this mean?
Impact Weekly Cost
Rent increase (landlords pass on costs) +$8.50
Utilities (energy costs) +$3.20
Food (transport costs) +$5.80
Total Weekly Loss from February Hike +$17.50
Annual Loss $910
The February hike alone cost each low-paid renter nearly $1,000 per year.
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CHAPTER 23
The February Decision – CPI at 3.6%, RBA Admits “Temporary Factors”
Treasurer Jim Chalmers’ response to the February 3 decision acknowledged the pressure on families but noted that inflation had “moderated significantly from its peak” .
What neither Chalmers nor the RBA acknowledged was that the entire basis for the hike was built on broken data.
The CPI in February measured 3.6%. But for the low-paid, effective inflation was already 7-8%.
The RBA knew the CPI was “not an ideal indicator” of cost of living—Governor Bullock had admitted this in her February 6 testimony . Yet they used it anyway.
The question that cannot be answered:
“If you knew the CPI was not ideal, if you knew some of the inflation was temporary, if you knew low-income households were disproportionately affected—why did you hike rates in February, before the war, before any new shock, based on data that you yourself admitted was flawed?”
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CHAPTER 24
The Iran War – When Oil at $107 Revealed Everything
On February 28, 2026, war erupted in the Middle East. The Strait of Hormuz—through which 20% of the world’s oil passes—was effectively closed. Global energy markets plunged into chaos .
The Energy Shock:
Metric Before War After War Change
Brent crude $70/barrel $107/barrel +53%
Petrol price $1.71/L $2.20/L+ +29%
NAB inflation forecast 3.8% 5%+ +1.2%+
For the low-paid worker, this was catastrophic. Every dollar at the petrol pump flowed through to every other essential expense—food, because transport costs increase; utilities, because energy costs increase; rent, because landlords pass on their increased costs.
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CHAPTER 25
The March 17 Hike – The Second Strike, 5-4 Split, 4.10% Reached
On March 17, 2026, the RBA met again. This time, the decision was not unanimous. Five members voted for a hike, four voted to hold .
The cash rate rose to 4.10% .
The March Decision – What the RBA Saw :
Metric Value
Headline CPI (December-January) 3.8%
War impact on oil prices Sharply higher fuel prices
Treasury estimate +0.5-1.0% to inflation if oil stays high
Market pricing for March hike 58-75% probability
The Board’s statement was explicit about the war’s role :
“The conflict in the Middle East has resulted in sharply higher fuel prices, which, if sustained, will add to inflation. Short-term measures of inflation expectations have already risen. As a result, the board judged that there is a material risk that inflation will remain above target for longer than previously anticipated.”
But critically, the RBA also admitted that inflation was already too high before the war . Governor Bullock told reporters:
“Inflation was already too high before the conflict in the Middle East caused a global spike in oil prices.”
Two hikes. Two months. Both justified by the same flawed data.
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CHAPTER 26
The CPI Lie – How 3.8% Became 9% for the Low-Paid
The Consumer Price Index is not a cost-of-living index. The Australian Bureau of Statistics explicitly states this. But the RBA uses it as if it were.
Here is what the CPI missed in March 2026:
Item CPI Weight Low-Income Weight Price Increase CPI Impact True Impact
Petrol 3% 4% +29% 0.87% 1.16%
Food 16% 26% +8% (via transport) 1.28% 2.08%
Utilities 5% 15% +15% (energy costs) 0.75% 2.25%
Rent 25% 42% +4% (landlords pass costs) 1.0% 1.68%
TOTAL 3.9% 7.17%
This is before accounting for the fact that low-income households spend a higher proportion of their income on these essentials—not just a higher weight in the index, but a higher share of actual dollars.
When you adjust for the fact that a low-paid worker earning $948 per week spends 94% of their income on essentials, the effective inflation rate becomes:
“`
(7.17% × 0.94) + (0% × 0.06) = 6.74% (base estimate)
“`
But the Iran war added an additional shock that wasn’t fully captured. Petrol prices didn’t just rise—they spiked. Food prices didn’t just increase—they accelerated. Utilities didn’t just go up—they surged.
The real effective inflation rate for low-paid workers in March 2026: 9%.
The RBA saw 3.8%. The low-paid experienced 9%.
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CHAPTER 27
The Transmission Channels – Who Profits, Who Pays
The RBA identifies five channels through which monetary policy affects the economy. Each channel distributes costs and benefits differently.
Channel 1: The Cash Flow Channel
· How it works: Higher rates mean borrowers pay more, savers earn more. Because household debt exceeds deposits, net cash flow decreases.
· Who pays: Mortgage holders—each 0.25% hike adds about $90 per month to a $600,000 mortgage .
· Who profits: Banks—Westpac recorded a 26% increase in annual net profits to $7.2 billion.
Channel 2: The Savings-Investment Channel
· How it works: Higher rates reward saving, punish borrowing.
· Who pays: Businesses and households seeking to invest.
· Who profits: Those with significant savings—the top 20% of households.
Channel 3: The Asset Price Channel
· How it works: Higher rates reduce asset prices.
· Who pays: Asset holders—but only temporarily.
· Who profits: Those who buy at lower prices—again, the wealthy.
Channel 4: The Credit Channel
· How it works: Higher rates tighten lending standards.
· Who pays: First home buyers, small businesses.
· Who profits: Incumbent asset holders protected from competition.
Channel 5: The Exchange Rate Channel
· How it works: Higher rates appreciate the currency, reducing import prices.
· Who pays: Exporters, tourism operators.
· Who profits: Importers, consumers of imported goods.
For the low-paid worker earning $948 per week, renting, with no savings, no assets, and no prospect of buying a home—every single channel either passes them by or hurts them.
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CHAPTER 28
The Renters’ Tragedy – 42% of Income, 0% of Benefit
The low-paid worker spends 42% of their income on housing. They are almost certainly renting.
When the RBA hikes rates, what happens to rent?
Landlords, facing higher mortgage costs, pass those costs on to tenants. Research by the Reserve Bank itself confirms this: rents rise in response to higher interest rates.
The Combined Impact of Two Rate Hikes (February + March):
Item Before Hikes After Hikes Change
Rent (42% of income) $398.16/week $430.02/week +$31.86
Utilities (15% of income) $142.20/week $153.58/week +$11.38
Food (26% of income) $246.48/week $266.20/week +$19.72
Total Weekly Loss +$62.96
Annual Loss $3,274
The worker loses $3,274 per year in increased living costs directly attributable to the two rate hikes.
What do they gain?
· They have no mortgage, so no benefit from lower inflation expectations (eventually).
· They have no savings, so no benefit from higher deposit rates.
· They have no assets, so no benefit from lower asset prices (they weren’t buying anyway).
· They have no credit, so no benefit from tighter lending standards (they were already excluded).
The renter pays 100% of the cost and receives 0% of the benefit.
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CHAPTER 29
The Banks’ Windfall – $7.2 Billion Profit on the Back of Two Rate Hikes
While the low-paid worker loses $3,274 per year from the two rate hikes, the banks profit.
Westpac’s results tell the story:
· Annual net profit: $7.2 billion (up 26%)
· Share buyback: $1.5 billion (returning profits to shareholders)
· Net interest margin: Expanded as lending rates rose faster than deposit rates
The mechanism is simple: banks borrow short (deposits) and lend long (loans). When the RBA hikes rates, banks increase lending rates immediately but increase deposit rates more slowly and incompletely. The difference flows directly to the bottom line.
The RBA’s own research confirms this. When they push up the target policy interest rate, bank profits head towards the stratosphere.
The Transfer:
· From: Low-paid renters, paying $62.96 more per week
· From: Mortgage holders, paying $180 more per month
· To: Bank shareholders, receiving $7.2 billion in profits
This is not an accident. This is the designed outcome of monetary policy.
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CHAPTER 30
The RBA’s Mandate – Three Objectives, One Ignored
Section 10(2) of the Reserve Bank Act 1959 is clear:
“It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:
(a) the stability of the currency of Australia;
(b) the maintenance of full employment in Australia;
*(c) the economic prosperity and welfare of the people of Australia.” *
Three objectives. Equal in standing. Legislated by Parliament.
In practice, the RBA has prioritized (a) to the exclusion of (b) and (c). The inflation target of 2-3% has become the sole focus. Full employment is treated as a constraint, not an objective. The economic prosperity and welfare of the people—particularly the low-paid—is ignored.
The February and March decisions violated the RBA’s mandate.
They did not contribute to the economic prosperity and welfare of the low-paid. They actively harmed them—taking $3,274 per year from their already inadequate incomes, transferring it to bank shareholders.
They did not maintain full employment. Rate hikes destroy jobs, particularly in sectors that employ low-paid workers. The RBA’s own models show this.
They prioritized currency stability—defined as 2-3% inflation—over everything else. But even this is questionable, because the CPI at 3.8% was measuring from the wrong frame. The true inflation experienced by the low-paid was 9%.
The RBA was not fighting inflation. It was fighting a measurement.
And they did it twice in two months, on data they knew was flawed, before and during a war, while the low-paid bled.
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CHAPTER 31
The Cumulative Impact – Two Hikes, One Low-Paid Worker
Let’s add it up.
Impact Source Weekly Cost
February Hike – Rent increase +$8.50
February Hike – Utilities increase +$3.20
February Hike – Food increase +$5.80
March Hike – Additional Rent +$23.36
March Hike – Additional Utilities +$8.18
March Hike – Additional Food +$13.92
TOTAL WEEKLY LOSS +$62.96
TOTAL ANNUAL LOSS $3,274
The worker’s wage: $948.00 per week (36% of adequacy)
The worker’s increased costs from RBA hikes: $62.96 per week
Effective wage after RBA hikes (in purchasing power): $885.04 per week
New adequacy gap: $424.91 per week
The RBA didn’t just fail to protect the low-paid. They actively made them poorer.
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