Interest rate profit redirection policy

How the policy works

When the Reserve Bank raises interest rates to control inflation, banks automatically earn higher profits from existing variable-rate loans. Under this policy, a portion of these incremental profits - the extra margin above the baseline rate - would be redirected to fund social housing.

The economic mechanism

1. Rate Increase: RBA raises cash rate (e.g., from 3% to 5%)
2. Profit Calculation: Banks calculate additional interest income (2% increment)
3. Fund Allocation: 75% of incremental profit directed to housing fund
4. Social Investment: Funds finance affordable housing construction

Why this approach?

Traditional interest rate policy places the entire burden of inflation control on borrowers. This innovative approach ensures that the societal cost of fighting inflation generates a direct social benefit - more affordable housing for Australians in need.

Key benefits

• No Additional Cost: Borrowers pay the same interest rates
• Market Stability: Banks retain 25% of incremental profits
• Transparent Process: Independent authority manages funds
• Measurable Outcomes: Direct link between rate rises and housing delivery

Key questions we're asking

For individuals and families

1. Impact Assessment: How have recent interest rate rises affected your household?
2. Housing Needs: What type of social housing would benefit your community most?
3. Policy Support: What aspects of this policy are most important to you?

For industry and experts

1. Implementation: What technical considerations should we address?
2. Market Impact: How can we minimise unintended consequences?
3. Governance: What safeguards ensure fund independence and efficiency?

For community organisations

1. Housing Priorities: Where should social housing investment focus?
2. Community Benefit: How can this policy best serve vulnerable populations?
3. Long-term Vision: What outcomes would demonstrate success?

Consultation materials

All background papers, economic modeling, and technical specifications are available on our consultation hub.

Upcoming events

Join us at these consultation events to discuss the policy directly with our team and other community members.

Special accessibility support

• Auslan interpreted sessions available
• Easy Read summaries provided
• Translation services in 12 languages
• Direct phone consultations: 1800 020 008

Understanding the documents

Start here

If you're new to this policy, we recommend starting with the Executive Summary for a clear overview. The Easy Read Guide provides the same information in accessible language with helpful visuals.

For detailed analysis

The Full Policy Proposal contains comprehensive details including:

• Mechanism for calculating incremental profits
• Governance structure for the Social Housing Authority
• Safeguards against market distortions
• Performance metrics and accountability measures

Technical resources

Banking professionals and economists should review the Economic Impact Assessment which includes:

• Stress testing under various economic scenarios
• Projected housing supply increases by region
• Banking sector profitability analysis
• Inflation control effectiveness modeling

Stay informed

All documents are updated as the consultation progresses. Sign up for updates at treasury.gov.au/alerts to receive notifications of new materials.

Stakeholder Engagement

Banking Sector

We're working closely with the Australian Banking Association and individual banks to ensure smooth implementation. Key considerations include:

• System integration requirements
• Compliance timelines
• Reporting standardization
• Market stability safeguards

Housing & Construction Industry

Partnership opportunities exist for:

• Social housing developers
• Community housing providers
• Construction companies
• State housing authorities

Economic & social organisations

We welcome input from:

• Economic think tanks
• Housing advocacy groups
• Social welfare organisations
• Academic institutions

Media information

Key messages

1. Balanced Approach: This policy maintains monetary policy effectiveness while addressing social needs
2. No Additional Burden: Borrowers pay the same rates; only profit allocation changes
3. Transparent Process: Independent authority ensures accountability
4. Measurable Outcomes: Clear targets for housing delivery

Spokesperson availability

Senior Treasury officials are available for interviews and briefings. Contact our media team to arrange.

Visual resources

Downloadable infographics, charts, and animations explaining the policy mechanism are available in our media kit.

Get in Touch

General Inquiries

Our consultation team is ready to help with any questions about the policy or how to participate. We aim to respond to all inquiries within 2 business days.

Technical Support

For help with online submissions or accessing documents:

• Email: techsupport@treasury.gov.au
• Phone: 1800 020 009 (dedicated technical line)

Regional Engagement

Can't attend capital city forums? We offer:

• Virtual participation options for all events
• Regional consultation sessions (schedule on website)
• Phone and video consultations by appointment
• Written submission support via phone

Language Support

Free translation and interpretation services:

• Arabic: 1800 020 010
• Mandarin: 1800 020 011
• Vietnamese: 1800 020 012
• Greek: 1800 020 013
• Other languages: 1800 020 008

Feedback on the Consultation Process

We're committed to continuous improvement. Share your experience:

• Survey: Brief feedback survey after participation
• Email: process.feedback@treasury.gov.au
• Phone: Feedback hotline 1800 020 020

Your input helps us improve future consultations and ensure all Australians can participate effectively in policy development.