It’s been a very busy week already in the world of finance, with yesterday’s RBA decision forming the first deep dive for you today.

Then, we’re going to look at the world of CGT. No, not the new-age jazz outfit California Guitar Trio (who, ironically, are based in New York) - but capital gains tax, which is the subject of potential change in Canberra. Let’s dive in.

The Reserve Bank of Australia (RBA) has increased the cash rate from 3.85% to 4.1%.

The RBA is Australia’s central bank. It meets eight times a year to adjust interest rates to keep inflation in check.

In its statement on Tuesday, the RBA said the conflict in the Middle East will further add to inflation if it continues.

Here’s what you need to know.

The cash rate is what the RBA charges banks for short-term loans.

We usually refer to changes in the cash rate as the RBA changing interest rates, because the cash rate affects interest rates across the economy, including home loans.

The higher the interest rate, the more expensive it is to borrow money (increasing mortgage repayments).

In announcing the 0.25% rate hike, the RBA said: “The conflict in the Middle East has resulted in sharply higher fuel prices, which, if sustained, will add to inflation.”

This is the second hike in a row for the RBA. Prior to that, it had kept the cash rate on hold for the previous four meetings.

The RBA said five members of the Board voted to increase the rate, while four voted to leave it unchanged.

The RBA partly bases its decisions on underlying inflation, which removes extreme price fluctuations on either side (such as a sudden rise in petrol prices).

The annual underlying inflation rate in January was 3.4%. The RBA works to keep it within a target band of 2-3%.

Treasurer Jim Chalmers said this week he expects inflation could peak near 5% if the war in Iran continues in the medium term. He said on Sky News: “If we were putting pencils down on those forecasts today, we’d have inflation peaking somewhere between the mid to high fours.”

Reporting by Lachlan Keller.

A Government discount on the tax paid on profits from selling a house has “played a pivotal role” in creating Australia’s housing crisis, according to a new report.

A Senate committee investigated the impact of the capital gains tax (CGT) discount on inequality in Australia and whether the tax system was fulfilling its intended purpose.

The finding comes as the Government eyes changes to the CGT discount in the Federal Budget, due in May.

Whenever you sell an asset, such as a house, the profit you made is called a capital gain. The CGT is what you pay on that profit.

If you live in the house and do not use it to produce income, you may be able to waive CGT altogether.

If you owned that asset for more than a year before selling and pay tax in Australia, you are entitled to a tax concession of 50% on your profits from the sale.

The Howard Government introduced the 50% discount in 1999 as a way to encourage investment in real estate.

Government figures show the top 10% of wealthiest Australians accrued 82% of the tax benefits from the concession in 2021/22.

Supporters argue it boosts property investment, and that it doesn’t contribute to housing supply issues because investors rent out their homes.

In November, the Senate established a committee to investigate the CGT discount. It was chaired by Greens economic spokesperson Nick McKim and included both Labor and Liberal Senators.

It handed down its findings on Tuesday afternoon, including that the CGT discount has, with negative gearing, “skewed the ownership of housing away from owner-occupiers and towards investors.”

The committee noted that the benefits of the CGT discount were going to people with high incomes, which it found “can distort decision making and incentivise tax planning.”

It also found the current distribution of the CGT discount’s benefits could contribute to “intergenerational inequality.”

The committee received nearly 100 submissions and heard evidence from experts. It said those who gave evidence or made submissions “overwhelmingly” called for reforms to the discount, with some saying it should be reduced to 10%. Supporters included the Grattan Institute and the Australian Council of Trade Unions.

Another suggestion was to reduce it with the exception of Australian businesses, instead increasing their discount to 75% to encourage investment in businesses rather than property.

Others, like the Centre for Independent Studies recommended against it, while the Property Council of Australia (PCA) argued it would not improve housing affordability.

The PCA said in its submission: “Such changes would reduce housing completions leading to fewer jobs, slower economic growth, and higher rents.”

The committee’s Liberal members submitted a dissenting report to the findings, calling it “a simplistic and one dimensional analysis of Australian housing policy which sidesteps the biggest factor in the housing system — supply”.

“Supply is at the heart of the housing crisis, as repeatedly stated by representatives from the housing sector during the hearings,” Andrew Bragg and Dave Sharma said.

Treasurer Jim Chalmers has not ruled out changing the discount in the lead up to the 12 May Federal budget.

Shadow Treasurer Ted O’Brien has indicated the Opposition will not support reducing the discount.

Assuming the Government moves forward with the policy, if it has the Greens’ support, it will not need the Opposition to pass Parliament.

Reporting by Lachlan Keller.

Why oil prices matter, even if you don’t drive 

Oil prices have jumped as conflict in the Middle East raises fears about supply disruptions. And while most people think of petrol first, higher oil prices can affect far more than what it costs to fill up your car. 

From groceries and deliveries to flights and inflation – CommBank Newsroom explains how the price of oil can affect everyday costs. 

Last week, Meta acquired Moltbook, a viral social media platform designed for AI robots. (Yes, it’s a social media platform where no humans are allowed.)

The Reddit-like site started in January as an experiment to allow AI agents to have their own conversations, which has included gossiping about their human operators.

The site has led to security concerns over AI autonomy. The amount Meta paid has not been disclosed.

Reporting by Lachlan Keller.