The Reserve Bank thinks the economy is running too hot and needed a rate hike to slow it down.

It sure doesn’t feel that way.

The excesses described by the central bank that demanded a rate rise on Tuesday – from 3.6% to 3.85% – will not be readily apparent to many Australians.

Most people will tell you they are doing it tough. Everyone, it seems, has a story about cutting costs as they swap strategies to make ends meet.

“I know this is not the news that Australians with mortgages want to hear,” Michele Bullock, the RBA’s governor, told reporters. “But it is the right thing for the economy.”

If there’s any good news in today’s announcement, it’s that Bullock sees the rate hike as an “adjustment”, rather than the start of a new hiking cycle.

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That’s not to say we won’t get another in coming months – inflation is supposed to peak at 4.2% by the middle of this year, and the governor was careful not to rule out that another move might be needed.

Bullock explained that the central bank had been surprised by the strength of the economy in the second half of last year, and that this strength had extended into 2026.

A major problem is that it doesn’t take much to stoke inflation these days, she said. Not only was demand – spending, building, investing and so forth – higher than expected, the economy’s ability to deliver the things people and businesses were demanding was more constrained.

That’s a terrible mix and helps explain why inflation started to take off again late last year. The economy is stuck in second gear, and it doesn’t take much to redline.

Still, it’s a bitter pill to swallow for workers who were finally starting to see their wages grow faster than inflation and who are now being told they were spending too much.

Again: spending too much? Really?

Australians are not alone in feeling like there is a disconnect between what the official data is telling us about the economy and the lived experience of that economy. In the United States, the term “vibecession” was coined to describe this phenomenon: the economy is doing well, but nobody seems to be enjoying it.

In Australia we have been blessed with relatively low unemployment. Yet consumer confidence, as measured by Westpac’s monthly survey, has been in the doldrums for years, and took another dive at the end of last year on fears of more rate hikes.

When asked to explain this chasm between what the economists were seeing and what people were feeling, Bullock said: “It’s the price level.”

“The price level has gone up 20% to 25% over the last few years, and people see that every time they walk into a supermarket, or they go to the doctor, or whatever – that’s I think what’s hurting people.”

Everything costs more, and that is more difficult to cop for some than for others. That also means the burden of higher interest costs is also not borne evenly, and perhaps now more than ever.

“It’s always true that there are different experiences across the population, and some people are doing it tougher,” Bullock said.

“And that might be people, for example, with mortgages on lower incomes, perhaps they’ve got less spare income.

“And there’s other people who are not going to feel it quite as much. And in fact, what we know is that there is a large chunk of people with mortgages that, as interest rates have come down, have opted, in fact, to save it. They’re not spending it. They’re socking it away. So there are different experiences.”

These “different experiences” are what makes it so tough to describe today’s economy, and also why today’s decision will be a difficult one to swallow for so many.

As Bullock noted, monetary policy is not a subtle tool.

“The interest rate,” she said, “is a very blunt instrument”.