Australia raises interest rate to 4.85%, highest since 2008, as AI and fuel costs push up prices

The Reserve Bank of Australia (RBA) raised its cash rate by 25 basis points to 4.85% on Tuesday 3 November, the highest level in 18 years, Cointelegraph reported. The decision was announced at 2:30pm Sydney time (8:30am PKT).

The decision in numbers

• New cash rate: 4.85%, up from 4.60%
• Vote: 6 to 3; three board members wanted to hold
• Inflation outlook: the RBA now expects inflation to come back to the top of its 2% to 3% target only by late 2027, about three quarters later than it forecast before

Why the RBA hiked

The board gave two reasons:

1. AI spending. Investment linked to artificial intelligence is pushing up the cost of technology and driving fast price growth for tech goods.
2. Energy and fuel. Higher energy, fuel and commodity prices, which the board linked partly to the war in the Middle East and the disruption in the Strait of Hormuz.

Treasurer Jim Chalmers said: "Today's decision by the RBA was widely expected, but that doesn't make it any easier for families and businesses."

The move goes against the US Federal Reserve, which kept its rates unchanged last week. CNBC also reported the hike as taking rates to an 18-year high.

What it means for Pakistanis in Australia

For Pakistani families and students in Australia:

• Home loans: most Australian mortgages are on variable rates, so repayments rise within weeks. On a A$600,000 loan, a 0.25 point rise adds roughly A$90 to A$100 a month to repayments over 30 years.
• Students: rent and living costs in Sydney and Melbourne are already high, and tighter credit tends to keep rents up.
• Money sent home: a higher rate can support the Australian dollar, which would mean more rupees per dollar sent to Pakistan. Check today's rate with our currency converter.

And in Pakistan

The RBA's reasoning, fuel and energy costs from the Gulf war, is the same pressure Pakistan faces. The State Bank of Pakistan's policy rate and recent decisions are on our policy rate page, and inflation on the CPI page, where October came in at 9.6%.