In a statement, RBA governor Philip Low said that inflation in Australia has “increased significantly”.

“While inflation is lower than in most other advanced economies, it is higher than earlier expected. Global factors, including COVID-related disruptions to supply chains and the war in Ukraine, account for much of this increase in inflation. But domestic factors are playing a role too, with capacity constraints in some sectors and the tight labour market contributing to the upward pressure on prices. The floods earlier this year have also affected some prices,” he explained.

“Inflation is expected to increase further, but then decline back towards the 2–3 per cent range next year. Higher prices for electricity and gas and recent increases in petrol prices mean that, in the near term, inflation is likely to be higher than was expected a month ago. As the global supply-side problems are resolved and commodity prices stabilise, even if at a high level, inflation is expected to moderate. Today’s increase in interest rates will assist with the return of inflation to target over time.”

Today’s increase in interest rates by the board, Mr Lowe continued, is a further step in the withdrawal of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic.

“The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed. Given the current inflation pressures in the economy, and the still very low level of interest rates, the Board decided to move by 50 basis points today. The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead.”

“The size and timing of future interest rate increases will be guided by the incoming data and the board’s assessment of the outlook for inflation and the labour market. The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time,” he concluded.

Reflecting on the decision, Legal Home Loans director Andrew Johnson – who recently spoke with Lawyers Weekly about whether lawyers can benefit from Labor’s new housing policy and also what last month’s rate rise will mean for lawyers who own property – said that given the RBA’s cash rate increase today, lawyers “should be prepared” for major banks to raise their interest rates as they pass the increase onto borrowers.

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“Lawyers should also be ready for further raises to the cash rate this year, as economists expect we will see a series of rises throughout 2022,” he warned.

“If lawyers are concerned about rising interest rates, they should consider fixing a part or all of their mortgage as this will protect them from interest rate rises and provide certainty of repayments for their households going into this next period.

“As always, we recommend that they speak to a trusted mortgage professional for best advice.”