Interest rates have officially risen and people from around Dungog all have different views on this

To many that are already struggling, interest rate rises pose a significant challenge, according to Dungog Community Centre Manager Kate Murphy.

"If something is going to rein in inflation, you have to see it as a good thing. But you've also got to look at the impact on individuals," she said.

Specifically, Ms Murphy is concerned about people who are renting or have gone into debt to purchase a house and now have more pressure placed on their budgets.

"The majority of people I work with already have very little disposable income. By putting up interest rates you're pushing them into a much more difficult position," she said.

This is the first time that interest rates have risen in Australia in 11 years leaving many to wonder how it will affect them. Westley Neilson, a Dungog resident and director of Nexus business advisers, works in accounting and taxation and believes the impact will be felt by many.

"It potentially has quite a significant impact for residents, both homeowners and businesses alike," Mr Neilson said. "The flow through on increasing costs of borrowing will clearly have an impact."

The interest rate was increased by 25 basis points on Tuesday, May 3, by the Reserve Bank of Australia in an attempt to reduce inflation. It will predominantly affect three groups around Dungog, businesses, homeowners/renters and retirees, according to Mr Neilson.

"Businesses should be looking at their current levels of income, their current costs of doing business and seeing what they can do to manage their change. Looking at their budget, revising it," Mr Neilson said.

Another aspect that businesses will have to take into account is changes in customer spending. Jo Hardie owns the small business Spewy and anticipates a drop in sales and a rise in costs due to higher interest rates. Mrs Hardie has also recently purchased a house in Dungog.

"It's not going to affect the way I operate, but people don't see my product as a necessity. I think that people may stop shopping for things like that," she said.

Mrs Hardie has also seen the cost of doing business go up, resulting in Spewy having to raise their price.

Mr Neilson sees this as something that businesses across Dungog will have to grapple with in the coming months.

"Predominantly, the industry here is agriculture, education and tourism. A lot of people work outside of Dungog, with increased cost of living, increased cost of fuel. It really does have quite a significant impact. Us being in a regional area, generally things cost more," Mr Neilson said.

Landowners and renters will also feel the impact of rising interest rates. Interest rates rising means the cost of borrowing money goes up. This means that mortgage repayments may start increasing as interest rates get higher and higher.

Mrs Hardie, having recently purchased a house in Dungog, has felt the impact of this and has had to factor it into her decision making.

"We were tossing up either putting little bits of money into it ourselves to finish building it ourselves or whether we get another loan to get it done quicker. We decided, because of the interest rates, we'll do it ourselves," she said.

Retirees will also feel the impact of rising interest rates. Retirees can be split into two groups, pensioners and self-funded retirees.

Self-funded retirees have been hit with falling interest rates for the past 11 years, meaning they earn less off whatever they have in the bank, according to Mr Neilson.

Rising interest rates means that self-funded retirees earn more off that money that they wouldn't have earnt otherwise. Retirees who receive a pension may not be so lucky, as they have to deal with a rising cost of living on a pension that remains largely unchanged.

After outlining how rising interest rates will affect different people in Dungog, it's clear that people who already have money in the bank will benefit, whereas people who need to borrow money or are already in debt may feel the financial stress, according to Mr Neilson.

"It just highlights the importance of making sure that both households and businesses are aware of their financial position and the importance to plan for things like this," Mr Neilson said.