David Koch Urges RBA to Hold Rates Amid Household Squeeze

Compare the Market economic director David Koch has called on the Reserve Bank to hold interest rates steady when it meets this month, warning that households already battered by rising living costs cannot withstand another increase. Koch argued that three cash rate hikes in 2026 — in February, March and May — have already heaped pressure on mortgage holders, and that inflation is being driven by factors outside consumer control, including soaring petrol prices tied to Middle East conflict.

Official figures offer a mixed picture. The Australian Bureau of Statistics reported that headline inflation edged down from 4.0% to 3.8% in the year to June, but the trimmed mean measure — which strips out volatile items — stuck at 3.6%, still well above the RBA’s 2–3% target band. Meanwhile, household spending rose 0.8% in June and is up 6% for the full 2026 financial year, defying expectations that earlier rate rises would severely crimp consumption.

Koch appealed directly to RBA governor Michele Bullock to look beyond monetary policy. “Maybe Michele Bullock could have a word to the Treasurer instead and say, ‘Hey mate, will you cut spending and reduce demand and give us a bit of help with inflation that way?’” he said. The financial commentator stressed that mortgage holders are not “splashing cash” but are being hit by global fuel shocks and government spending, yet they remain the target of rate hikes.

The RBA left the cash rate at 4.35% in June and Koch expects a hold again in August. However, he cautioned that many economists still forecast at least one more rise before year-end, leaving households in limbo. Compare the Market calculates that a borrower with the average loan size of $735,000 would pay about $120 more per month from a single additional 0.25 percentage point hike, on top of the $370 extra already imposed by this year’s three increases.

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Breaking Down the Case Against Another Hike

Inflation Drivers Are Outside Consumer Control

Koch’s central argument is that current inflation is not the result of runaway consumer demand but of supply-side shocks — particularly fuel prices inflated by geopolitical tensions. The ABS data on headline inflation dropping only marginally supports the view that price pressures are sticky despite rate rises, because they are rooted in energy and input costs rather than household spending binges. AMP economist My Bui noted that quarterly household spending volumes grew 0.7% in the last three months, which is above population growth but does not necessarily signal reckless spending; it may reflect the unavoidable cost of essentials.

Government Spending Remains in the Spotlight

By imploring the RBA governor to lobby the Treasurer, Koch is pointing to a fiscal policy dimension that often gets sidelined in rate decisions. If government spending is adding to aggregate demand, as Koch suggests, then tighter fiscal policy could share the inflation-fighting burden. The RBA is independent, but the optics of households bearing the brunt while Canberra’s outlays continue would intensify political pressure if rates rise again.

The Mortgage Pain Is Already Here — and Could Deepen

The numbers cited by Compare the Market crystallize the household impact. A $735,000 mortgage has become $370 more expensive each month from this year’s three hikes. Another quarter-point move would add roughly $120 — pushing the cumulative monthly increase to nearly $500 since the start of 2026. For many families, that represents a significant share of disposable income, especially when combined with elevated grocery and fuel bills. Koch’s warning that many are “on the brink” reflects widespread anxiety that the next hike could trigger a wave of financial distress.

Household Spending Is Holding Up, But Why?

The 6% annual rise in household spending and the 0.8% monthly lift in June suggest consumers have not yet retrenched sharply. Bui cautioned that the full impact of the three rate rises hasn’t fed through to spending patterns, which means there is still considerable downside risk to consumption. If the RBA does hike again, the delayed effect could accelerate, leading to a sharper pullback that would hurt the broader economy — precisely the outcome the central bank wants, but with the risk of overshooting and tipping vulnerable households into delinquency.

What This Means for Your Mortgage and Household Budget

  • If you have a home loan around the average $735,000, stress-test your budget for an extra $120 a month. Factor in that combined with previous hikes, your repayments have already climbed about $370 this year.
  • Check your current interest rate against what lenders are offering new customers: after three hikes, your existing rate may be well above the market, and refinancing could offset some of the pain.
  • Contact your lender to discuss hardship assistance or repayment pauses if you are already struggling — early engagement can prevent arrears.
  • Revisit your household spending with the latest data in mind: despite a 6% rise in spending over the past year, many of the largest cost items are non-discretionary, but cutting back on optional expenses can build a buffer for further rate moves.
  • Use comparison sites to ensure you aren’t paying a “loyalty tax” on your home loan; a broker can help you find a sharper rate even if you’ve been with the same bank for years.