Updated 10 November 2026
Inflation can make debt repayments harder to afford when everyday expenses rise faster than income. As more money goes towards essentials such as food, housing and transport, less may remain for credit cards, personal loans and other debts.
Inflation itself does not automatically increase the balance of an ordinary credit card or personal loan. However, interest, fees and further borrowing can increase the amount owed.
What do the latest Australian inflation figures show?
The Australian Bureau of Statistics (ABS) released its September 2026 Consumer Price Index figures on 28 October 2026.
Consumer prices increased by 4.3% in the 12 months to September 2026, compared with 4.0% in the 12 months to August. Prices rose by 0.8% during September before seasonal adjustment.
Annual price increases included:
- Transport: 8.7%
- Housing: 5.2%
- Health: 3.7%
- Food and non-alcoholic beverages: 3.2%
These figures measure price changes across categories of household spending. They do not mean every household’s expenses increased by the same amount. Source: ABS September 2026 Consumer Price Index
How can rising living costs make repayments harder?
When income stays the same, higher essential expenses reduce the money available for debt repayments.
For example, a household might have $500 remaining each month after essential expenses, with $400 in debt repayments due. If essential expenses increase by $200, the household would have only $300 available, creating a $100 shortfall towards monthly debt repayments.
This example is illustrative. It shows how repayment difficulties can develop even when the amount owed and scheduled repayments have not changed.
Does lower inflation make household bills cheaper?
Lower inflation generally means prices are increasing more slowly. It does not mean previous price increases have been reversed.
If a hypothetical basket of purchases rises from $100 to $104, that is a 4% increase. If its price rises another 2% the following year, it will cost $106.08. Inflation has slowed, but the basket still costs more.
A fall in the overall price level is called deflation. Source: Reserve Bank of Australia
Why can your expenses rise faster than the inflation rate?
The Consumer Price Index measures changes across a broad basket of goods and services. Your household’s spending pattern may differ from that basket.
If a large share of your income goes towards expenses experiencing greater price increases, your budget may face more pressure than the headline inflation rate suggests. Source: RBA’s explanation of inflation measurement
How does the November RBA rate rise affect debt repayments?
On 3 November 2026, the Reserve Bank of Australia increased the cash rate target by 0.25 percentage points to 4.85%, effective from 4 November.
For households already facing higher living costs, an increase in borrowing costs can put further pressure on the money available for debt repayments.
The cash rate is not the interest rate charged on your loan. Your lender determines whether it changes your interest rate, how much it changes and when the change takes effect.
If your lender increases the rate on a variable-rate mortgage or personal loan, your interest costs may rise and your required repayments may increase. Existing fixed-rate loans generally retain their agreed interest rate until the fixed period ends. Credit card rates do not necessarily move in line with the RBA cash rate.
For illustration, if a lender passes on the full 0.25 percentage point increase, a borrower with a $500,000 loan balance would face approximately $1,250 in additional interest a year, or $104 a month, assuming the balance remained unchanged. This is an interest-cost illustration, not a calculation of the change in scheduled repayments.
Higher living costs and higher loan repayments can affect the same household at once. If your budget was already stretched, check any notice from your lender and review what you can afford before your next payment falls due.
Source: Reserve Bank of Australia cash rate history
What can you do if you cannot afford debt repayments?
Start by identifying the gap between your available income and your commitments. Use current bills and account statements to list:
- Your take-home income.
- Essential living expenses.
- Debt balances and scheduled repayments.
- Any overdue amounts.
If you cannot meet a payment, contact the lender or service provider early to discuss hardship assistance. Explain what has changed and ask about an arrangement you can realistically afford. Financial counselling can also help you understand your position and available options. Source: ASIC’s Moneysmart
Does struggling with repayments mean you should become bankrupt?
Difficulty meeting repayments does not, by itself, establish that bankruptcy is appropriate. Inflation statistics also cannot determine which debt option suits an individual.
The next step is to understand your financial circumstances and the implications of the options available to you. If you are considering bankruptcy, seek information about how it could affect your situation before making a decision.
Call Aravanis for information about bankruptcy
If rising living costs have contributed to unmanageable debt, Aravanis can help you understand the bankruptcy process.
Call Aravanis on 1300 369 108 to speak with a consultant about bankruptcy and your circumstances.
Updated 10 November 2026. Inflation figures: ABS September 2026 CPI, released 28 October 2026. Interest rate figures: RBA November 2026 cash rate decision.