Conflict in Middle East behind Reserve Bank's decision to raise cash rate

The RBA announced it would raise the cash rate 0.25 per cent to 4.1 per cent on Tuesday, March 17.

All four major banks predicted the rise, which was the second in two months.

In February, RBA governor Michelle Bullock confirmed the cash rate would be increased to 3.85 per cent, following an unexpected rise in inflation late last year.

The February hike was the first after more than two years of rate holds or decreases.

Five members of the Monetary Policy Board voted for the increase, while four members voted to leave it unchanged at 3.85 per cent.

Petrol prices rose sharply after conflict between Iran and the US broke out in the Middle East.

Sustained high fuel costs would lead to inflation, the board said in a statement following the announcement of the rate rise.

"There are material uncertainties about the outlook for domestic economic activity and inflation and the extent to which monetary policy is restrictive," the board said.

"Globally, the conflict in the Middle East poses substantial risks in both directions. A longer or more severe conflict could put further upward pressure on global energy prices; this will push up near-term inflation and could also increase inflation further out if it impairs supply capacity or price rises get built into longer term inflation expectations.

"Higher prices and prolonged uncertainty may cause growth to be lower in Australia's major trading partners and also in Australia."

Within Australia, business investment was above expectation, while consumption was below. At the same time, growth in unit labour costs declined.

Labour under-utilisation remained low, while unemployment sank below what was expected.

Australian home owners with a mortgage are looking towards tightening their belts with interest rates rising again.

A home owner with a $600,000 mortgage and 25 years remaining on their loan could expect to pay an additional $181 per month on their payments, according to Canstar modelling.

See our guide to what Australians will be paying after this latest rate hike and what it means for you.