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The Reserve Bank of Australia raises rates to 3.85% to cool a "hot" economy, sparking outrage among struggling families facing a deepening cost-of-living crisis.

The disconnect between the boardroom and the kitchen table has never been wider. In a move that has sent shockwaves through the mortgage belts of Sydney and Melbourne, the Reserve Bank of Australia (RBA) has lifted the cash rate to 3.85%, delivering a bitter pill to a nation already choking on the cost of living.
Governor Michele Bullock’s announcement on Tuesday, February 3, 2026, was framed as a necessary "adjustment" to cool a "hot" economy. But for millions of Australian families, the economy feels anything but hot. It feels cold, harsh, and increasingly impossible to navigate. The decision to hike rates from 3.6% to 3.85% comes as inflation stubbornly persists at a projected peak of 4.2%, but the logic of punishing borrowers to curb spending is becoming "hard to swallow" for a populace that has already cut every discretionary corner.
The RBA’s justification hinges on data that seems at odds with street-level reality. Bullock cited "surprising strength" in the economy during the second half of 2025, noting that demand for services, building, and investment is outstripping supply. "I know this is not the news that Australians with mortgages want to hear," Bullock admitted to reporters, "But it is the right thing for the economy."
This macroeconomic "right thing," however, translates to microeconomic disaster. The "excesses" the RBA is targeting—spending on travel, dining, and renovation—are largely the domain of older, mortgage-free demographics. Meanwhile, young families and first-home buyers are bearing the brunt of the policy, effectively subsidizing the spending of the wealthy with their own financial stability.
The mood across the Tasman is shifting from anxiety to anger. Social service organizations report record demand for food relief, even from dual-income households. The narrative that we are "all in this together" has fractured; it is clear that some are paying the price for the nation's economic "resilience" while others ride the wave of high interest on savings.
As Bullock warns that further hikes cannot be ruled out, the Australian dream of homeownership feels more like a trap. The economy may be "hot" on paper, but for the average worker, the winter of financial discontent has only just begun.
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