Who pays to bring inflation down?
Australia needs to look beyond the mortgage. The 60 Minutes interview with Reserve Bank Assistant Governor Sarah Hunter put a difficult question plainly: when inflation is too high, why does the burden of bringing it down fall so visibly on households and businesses?
A clear boundary — and an open debate.
Hunter acknowledged that government spending contributes to demand. She said the RBA studies federal and state budgets and includes them in its forecasts. But she also said it is not the Bank’s role to tell elected governments what they should spend. The RBA’s job is monetary policy, and its main tool is interest rates.
That answer explains the RBA’s role. It does not settle the public debate about whether the overall policy response is fair — or whether governments are doing enough to avoid making borrowers carry so much of the adjustment.
What the spending figures can — and cannot — tell us.
There is no official figure that says “government spending caused X per cent of inflation and household spending caused Y per cent.” Inflation is shaped by interacting forces — demand, supply constraints, wages, imports, energy, housing costs, taxes and subsidies. The data can show how spending contributes to activity; it cannot cleanly assign each price rise to one spender.
The headline figure includes policy and supply effects as well as pressure from demand.
The June-quarter national accounts offer a useful comparison. Government consumption grew 2.0 per cent over the year, while household consumption grew 1.8 per cent — in that narrow comparison, government consumption grew slightly faster. But across the whole economy in the June quarter, public demand added 0.1 percentage points to GDP growth and private demand added 0.2. Over the four quarters to June 2026, the published contributions add to roughly 0.6 points from public demand and 2.4 from private. These are contributions to GDP growth — not estimates of each sector’s share of inflation.
The RBA says it considers state and federal budgets when forecasting public demand, and its August assessment noted that fiscal balances capture more than public demand alone. Government demand is part of the Bank’s analysis; the unresolved question is whether fiscal policy is doing enough to share the work of cooling the economy.
Interest rates work — but the burden is uneven.
Hunter’s case for rate rises is that they reduce spending across the economy and help stop inflation becoming entrenched. She also acknowledged that higher rates reach people quickly through mortgage repayments, while affecting renters, businesses and others through broader prices and activity. The difficulty is that a broad tool imposes very different costs on different people.
Feels every change immediately, in next month’s repayment. This is the fastest and most visible channel monetary policy has — which is precisely why the adjustment lands here first.
May put off investment, shed staff or close. The effect arrives more slowly than a mortgage repricing, but it compounds — financing costs, supplier costs and softer demand all at once.
Can find today’s construction costs and interest rates no longer fit the original feasibility. In parts of Sydney I’m seeing completed or near-completed stock that is difficult to sell at prices that support the numbers it was built on — and people buying property off the plan facing serious losses on some purchases.
Those are local observations, not proof that every suburb or project is falling in value. They show why national averages can miss the pressure in particular developments and communities. Nor does building more homes automatically make housing cheaper in the short term: supply takes time, and it depends on land, infrastructure, skilled workers, materials and projects that can actually be financed. The ABS says builders have been passing higher labour and materials costs into new dwelling prices. When costs rise faster than sale prices, projects become unviable even while the country needs more homes.
What about 30-year fixed mortgages?
The United States’ 30-year fixed mortgage is attractive because borrowers can know their repayment rate for decades. But it is not a simple switch Australia can flick. The Parliamentary Library has noted the US system depends on institutions and funding arrangements not present here in the same form, making 30-year fixed loans less likely to emerge under Australia’s current structure.
Long-term fixed rates could protect borrowers from sudden repayment increases, but lenders would still need to price and manage decades of interest-rate risk. The idea deserves serious examination — alongside shorter fixed terms and other ways to give borrowers stability. It is a financial-system design choice, not a cost-free cure for high rates or housing unaffordability. Buyers and owners can test different repayment and borrowing scenarios using our property calculators.
Banks assess new borrowers at a rate at least three points above the loan rate. The test provides a safety margin if circumstances worsen — but it also sets how much a household can borrow. Policymakers should regularly explain how that buffer is calibrated, and what evidence would justify changing it.
Rates can cool demand. They can’t decide who carries the cost.
The answer is not to ignore inflation or ask the RBA to abandon its mandate — persistent inflation also hurts people, especially renters and lower-income households. The question is whether interest rates are being asked to do too much while governments, which control taxes, transfers and spending, avoid a frank debate about their part in demand.
The RBA incorporates government plans into its forecasts. What the public still lacks is a simple, regular account of how fiscal choices are expected to affect demand and inflation — and how those choices compare with the restraint being imposed on mortgage holders and businesses. Governments should publish that analysis, assess whether temporary support is well targeted, and time large spending programs against the economy’s capacity to deliver them. Housing policy, meanwhile, needs to focus on whether approved projects can actually be built: skills, infrastructure, materials, approval times and financing all matter.
Four decades of rate cycles.
I have sold through every rate cycle since the mid-1980s — more than 1,000 properties across the Sydney Eastern Suburbs. If you want an honest conversation about what this one means for your property, the numbers are on the table. You can also request a property appraisal based on current comparable sales and market conditions.
Sources: RBA — 60 Minutes interview with Assistant Governor Sarah Hunter (Oct 2026) and August 2026 assessment; ABS Monthly CPI Indicator, August 2026; ABS Australian National Accounts, June quarter 2026; Parliamentary Library of Australia on fixed-rate mortgage structures; APRA serviceability guidance. Local market observations are Alan Weiss’s own; commentary is professional assessment, not financial advice.
