Despite rising inflation and the cost-of-living soaring, most Australian homeowners still owe less on their mortgages than what their home is now worth.
It’s just one tidbit of insider information that Reserve Bank officials brought to light during a Senate Estimates hearing in Canberra on Wednesday October 28.
During the hearing, the RBA board’s candid reaction to inflation data was also captured when official Australian Bureau of Statistics figures were released.
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RBA Deputy Governor Andrew Hauser was giving evidence via video link when he quickly checked his phone as the numbers came out at 11:30am, and a tense Michele Bullock shot a look his way.
The results were bad news for the RBA, the under-pressure Albanese Government and millions of Australians already dealing with higher mortgage costs after four hikes so far in 2026.
Headline inflation for the 12 months to September was 4.3 per cent, up from 4.0 per cent in the year to August.
Underlying inflation at 3.6 per cent is also well above the RBA’s target of between 2 and 3 per cent.
Andrew Hauser said the results were broadly in line with the expectations of economists.
Money markets say the chance of a Melbourne Cup rate hike is now at 87 per cent.
“These are too high,” he told Deputy Liberal Leader Jane Hume.
“We have said that repeatedly and we will, I’m sure, say that again.”
Key facts revealed in the Senate Estimates economic hearing
- The Reserve Bank estimates that 5 per cent of first-home buyers, who used the Federal Government’s 5 per cent deposit scheme, are now in negative equity.
- Overall, only 1 per cent of mortgage holders are in negative equity according to the RBA (meaning nearly all of Aussie mortgage holders still owe less on their home than the home is worth).
- The nation’s inflation rate has been out of target for over a year.
- Australia has the third highest amount of investment in AI of any country in the world, after the United States and China.
- Treasury Secretary Jenny Wilkinson admitted the economy’s growth will slow, and will likely be worse than forecast in May’s Federal Budget.
Government spending debate
RBA Governor Michele Bullock said the Iran War and domestic demand pressures are both contributing to inflation.
“Oil and related prices have increased sharply again and will add materially to inflation, directly and indirectly,” Bullock told Senators.
“Short term inflation expectations are elevated. Importantly though it is not just these global pressures driving inflation in Australia.
“Government spending, federal and state … all contributes to aggregate demand in some way.”
The budget deficit for 2025/26 was $22.3 billion or 0.8 per cent of GDP. The budget deficit for 2026/27 is predicted to be $31.5 billion or 1 per cent of GDP.
Government spending as a proportion of GDP is at 26.9 per cent, which is the highest level in 40 years outside of the Covid pandemic.
Treasury Secretary Jenny Wilkinson tried to downplay the impact of public spending on inflation during the previous Senate Estimates on Tuesday.
“We are running a deficit… that is a much lower deficit than many countries,” Wilkinson said.
“Public demand has made less of a contribution to economic growth over this last period than private demand.”
Help for households could be on the horizon
Treasurer Jim Chalmers is promising a savings package in the mid-year economic update, due in December.
“Budgets aren’t the primary driver of prices in our economy, but we can and intend to continue to play a meaningful role in the fight against inflation,” Chalmers told the Canberra Press Gallery.
“We have an inflation challenge in our economy but this war in the Middle East is absolutely turbocharging those cost-of-living pressures.”
