Perth, May 5: Australian borrowers and businesses are facing renewed pressure after the Reserve Bank of Australia lifted the cash rate to 4.35 per cent at its May meeting, marking the third rate rise this year.
The decision comes as inflation remains above the RBA’s 2–3 per cent target range, with headline CPI at 4.6 per cent and underlying inflation at 3.3 per cent.
The RBA said inflation was already too high before the Middle East conflict, with higher fuel prices adding further pressure across the economy.
It expects inflation to remain above target for some time, while household and business spending is likely to slow.
Rateseeker managing director and co-founder Nick Chong said the latest inflation figures had forced the central bank to keep pressure on the economy.
“From the RBA’s perspective, this isn’t the time to take the foot off the brake and risk reversing progress that’s already been made.
“High inflation data is being driven by housing costs, fuel and energy costs, services (including insurance), and wage growth.
“For borrowers, this is where the rubber hits the road. Another interest rate hike means higher repayments and tighter borrowing capacity for borrowers.”
The increase is expected to add further strain to mortgage holders already managing higher living costs. Finder analysis said the May hike would cost the average borrower an extra $2,661 a year compared with the start of 2026.
Chong said borrowers should review their financial position rather than wait for rate relief.
“The time is now to look at your own financial position and review your buffers, your offset balance, living expenses, your loan structure, and what you’re planning over the next 12 to 24 months.
“Borrowers need to play a more active role by speaking to a mortgage broker or lender in this environment, because planning for stability matters more than waiting for relief.”
The impact is also being felt across workplaces, particularly among shift workers and small businesses.
Deputy chief financial officer Emma Seymour said the rate cycle was changing how businesses roster staff.
“What’s different about this rate cycle is not just the pressure it puts on shift workers, but how quickly it changes the structure of work itself.
“We’re seeing businesses be more cautious with their rostering, focusing on controlling risk rather than growth. Instead of building schedules around demand forecasts, many are now purely controlling costs. Deputy has already observed this, with total hours and shifts down between 6 and 8% in early 2026. This creates a unique challenge for shift workers as predictable income and shifts become increasingly out of reach.
“That loss of predictability is critical. Shift workers who can’t rely on consistent hours have a much harder time budgeting for rent, transport, or even childcare. They have reacted by restructuring how they work entirely; taking on multiple roles, stacking shifts across employers, and prioritising flexibility over stability just to maintain a basic income.”
Employment Hero APAC managing director James Keene said businesses were moving into a defensive position.
“Today’s rate hike will push Australian businesses further into a defensive footing. Our data is already seeing SMEs pull back on hiring and delay investment, as borrowing costs rise and consumer demand softens.
“The labour market is shifting to a more cautious approach, with casual employment growing more than twice the rate of full-time roles, up 9.2 per cent year-on-year, which tells us businesses are actively avoiding long-term workforce commitments in an uncertain environment.
“Wage growth has been flat for three consecutive months and shows no signs of shifting. These aren’t just numbers; it’s businesses making increasingly difficult trade-offs. Businesses need certainty to invest in their people, and right now, they’re not getting it – it’s a trend we can’t afford to ignore.”
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