February 4, 2026

(THE RBA’S STING IN THE TAIL)

February 4, 2026

Hello everyone

Some were divided over the RBA call on Tuesday in Australia. I was almost certain they would hike, and that’s what we got. But I don’t think they will end the story with just one hike.

In other words, expect more. In fact, investors and the general population should be preparing for a winter season, not only in employment, but also in yields.

There was just too much heat from excessive spending, which could not be ignored.

This rate rise will shape mortgage repayments, credit card rates, house prices, and the cost of living.

We will start to become aware of a trickle-down into people’s spending habits in the wider business community.

First to go will be the usual cup of morning coffee from your favourite café. Then restaurant meals and takeaways will be sidelined. Maybe the cancellation of a holiday.

Then we could see spending on the home – alterations & renovations – put on the back burner.

A second and third job could become part of the family mix.

Late payments may start to rise.

The battle becomes harsh as hardship applications rise, and reality really bites when homes must be sold.

There are fine margins – job loss, divorce, sickness can tip a family or individual into a dark reality they never believed they would experience.

Buyers suddenly vanish.

Sellers look for buyers by chopping the dollar value off their property.

The old saying that rings in everybody’s ears – “Housing can only go up.”

Wrong.

There is no doubt that many people will learn the hard way that property operates in cycles like all markets. I believe that property in Australia has just hit its ceiling, and the rate rise is the first indicator that will see houses start to moderate in price.

Indeed, one of Australia’s biggest banks – ANZ – has already called time on the housing boom for half the country.

In addition to this policy change, Australia’s growth rate is slowing, and by 2028 is only expected to be around 1.7%.

Take a deep breath. Buckle up. It will probably get tough.

Former Reserve Bank of Australia economist and Monash University senior economics lecturer Zac Gross said that with Tuesday’s rate hike factored in, the RBA may have to hike rates four times in 2026 and 2027, based on its updated inflation forecasts.

Many economists have viewed the government’s excessive spending as a major contributor to the heat in the economy, which has driven up inflation beyond the RBA’s target range.

A big-spending government and weak productivity have spurred inflation in Australia.

The Lucky Country is quietly stumbling.

Fortunately, we are resource-rich, which may save us in the long term.