For families across Wynnum, Manly and the bayside, another interest rate rise means one thing: less money at the end of each month.
On 3 November, the Reserve Bank lifted the official cash rate by 0.25 percentage points to 4.85%, effective from 4 November. It was the fifth increase of 2026 and took the cash rate to its highest level since November 2008. The changes are recorded in the RBA’s official cash-rate history.
For a $600,000 principal-and-interest mortgage with 30 years remaining, a fully passed-on 0.25 percentage-point increase would add about $97 a month to repayments. The actual amount will vary with the loan’s interest rate and remaining term.
Higher rates are meant to slow inflation by cutting spending. But they do not cut it evenly. A family with a large mortgage can pay hundreds of dollars more each month after successive increases. Someone who owns their home outright sees little direct change, while people with substantial savings may receive more interest. Renters, young families and lower-income households still face rising costs for essentials.
So the question is simple: why should some Australians carry so much more of the burden of controlling inflation than others?
A temporary, inflation-linked tax
Australia could add a second tool alongside interest rates: a temporary surcharge applying only while inflation remains persistently above the Reserve Bank’s target.
One possible model—not a final proposal—could work like this:
- Who pays: taxable incomes above $250,000 and company profits demonstrably above a clearly defined normal return—not ordinary wage earners, small businesses or households already under pressure.
- When it starts: after two consecutive quarters of annual inflation above the 2–3% target.
- When it ends: automatically, once inflation has been back inside the range for two consecutive quarters.
- Where the money goes: to improving the budget balance rather than financing additional spending, so it genuinely takes demand out of the economy.
These thresholds are illustrative. The RBA operates a flexible 2–3% inflation target over time, rather than treating every quarterly result as a rigid boundary. Any surcharge would therefore need legislation specifying the inflation measure, corporate-profit benchmark, commencement rules and independent expiry test.
This would not be a permanent tax rise or a punishment for success. It would be a rules-based, self-expiring way to share the cost of fighting inflation more fairly.
Why cut services when people need them most?
The other common answer to inflation is cutting government spending. But cuts to health, education, disability support and community services hit hardest many of the same households already struggling with mortgages and rent. They can end up paying more to live while receiving less support.
A targeted surcharge offers another path: improve the budget position without stripping back the services people rely on.
Would it actually work?
It would not replace interest rates, and it has limits.
Higher-income households tend to save a greater proportion of their income. That means a dollar taxed from them may reduce immediate spending less than a dollar squeezed from a financially stretched mortgage holder. This is why the design matters: the revenue must improve the budget balance rather than fund additional spending, and the surcharge should share the load rather than replace the Reserve Bank’s role.
Taxing exceptional company profits also raises difficult questions. “Normal return” would have to be defined carefully, and policymakers would need competition, monitoring and anti-avoidance measures to reduce opportunities for businesses to shift profits or pass costs on to customers.
Today’s inflation is not simply the result of households spending too much. The Reserve Bank says higher oil and other commodity prices associated with the Middle East conflict are adding to inflation. But Governor Michele Bullock has also been explicit that interest rates cannot directly change global oil prices. The RBA says its tightening is aimed at domestic capacity pressures, including the risk that businesses can pass higher costs on while demand exceeds the economy’s ability to supply goods and services.
The idea of using fiscal policy alongside interest rates is not fringe. The International Monetary Fund has argued that fiscal tightening can help contain inflation and allow central banks to increase interest rates by less. It also stresses the importance of protecting vulnerable households.
Australia has already demonstrated that investment tax concessions can be reformed. Under changes announced in the May 2026 federal Budget, negative gearing of residential property will be limited to new builds from 1 July 2027, while properties held before the announcement are exempt. The government will also replace the 50% capital gains tax discount with an inflation-based discount and a 30% minimum tax rate. Those capital-gains changes apply only to gains accruing from 1 July 2027.
Time for a fairer debate
Controlling inflation matters. Letting prices run unchecked hurts everyone, especially people on low incomes. But how we control it matters too.
Repeatedly raising borrowing costs while weighing up cuts to services puts the heaviest load on mortgage holders and vulnerable households. A temporary, inflation-linked tax on those most able to contribute deserves a place in the debate, alongside responsible budgets and an independent Reserve Bank—not instead of them.
For bayside families, this is not abstract economics. It is about household budgets, affordable housing and the services our community depends on.
Inflation may be everyone’s problem. Controlling it should not fall on the same people every time.