Key Highlights

  • The RBA raised its cash rate target by 25 basis points to 4.85%, the highest since November 2008.
  • Six Monetary Policy Board members voted to raise rates and three voted to hold, in the fifth increase this year.
  • Consumer prices rose 4.3% in September from a year earlier, up from 4% in August and the highest since March.
  • The RBA expects Inflation to stay elevated through much of 2027, returning to the target midpoint by mid 2028.

RBA Lifts the Cash Rate to 4.85%

The Reserve Bank of Australia (RBA) raised its cash rate target by 25 basis points to 4.85% on Tuesday, November 3, 2026. The level is the highest since November 2008, and the move was in line with the expectations of economists polled ahead of the decision. It is the fifth increase this year.

The Monetary Policy Board said it is conscious of the period in which inflation has been too high and remains focused on returning it to target.

A Split Board

The decision was not unanimous. Six of the nine Monetary Policy Board members voted for the increase, and three voted to hold the cash rate steady. The Board's statement, published with the decision, recorded the 6 to 3 division, and the accompanying Statement on Monetary Policy set out the forecasts behind the majority view: inflation higher for longer, spending slowing and Unemployment rising.

The RBA is tightening while higher borrowing costs and cost of living pressures weigh on households and activity.

Inflation Keeps Rising

Inflation is the backdrop to the decision. The Consumer Price Index rose 4.3% in September from a year earlier, accelerating from 4% in August and marking the highest reading since March. The target range is 2% to 3%.

In its Statement on Monetary Policy, the RBA described inflation as still too high and expected to stay high for longer. It attributed part of the pressure to higher fuel prices, but said a range of other prices and costs have also been increasing too quickly.

Several forces are at work. Higher fuel and Commodity prices, linked to the conflict in the Middle East, are feeding through. Domestic capacity constraints are tighter. Firms report rising costs and are passing them on to consumers. The RBA also pointed to AI related investment, which is driving rapid price growth for technology related goods.

Governor Bullock's Warning in September

At the September decision, RBA governor Michelle Bullock said inflation is "too high," driven by higher oil prices from the Iran war and stronger domestic spending. She added: "We're seeing signs that upside risks to inflation are materializing," and said further increases would follow "if that's what's needed to get inflation down."

Asked whether she sees a Recession for Australia, Bullock said it is "not our base case at the moment."

Growth, Housing and Jobs

Activity has softened. Australia's GDP rose 2.1% in the June quarter from a year earlier, down from 2.5% in the March quarter, and growth has slowed over the first two quarters of 2026. In its November Statement on Monetary Policy, the RBA said spending has slowed, housing prices have declined and the unemployment rate has risen.

The Central Bank expects the economy to slow over the next few years, and it said this year's rate increases will help to slow spending further, which it considers necessary to bring inflation down. The unemployment rate is expected to rise further, by more than previously anticipated, although the RBA expects the number of jobs to keep growing.

The Forecast Path for Inflation

The RBA's statement said inflation is expected to "remain elevated through much of 2027." Inflation is not forecast to return to the 2% to 3% target range until late 2027, which is three quarters later than the previous forecast, and it is expected to stay above 3% over the coming year. Its Statement on Monetary Policy places the return to the middle of the target range in mid 2028.

The RBA cited the recent rise in global fuel prices and domestic price and cost pressures as the reasons for the later timetable. The persistence of price growth also raises the risk that higher inflation expectations become embedded, a risk flagged in market commentary on the decision.

What to Watch Next

Items on the calendar include the next monthly consumer price index release, the unemployment rate and jobs growth, housing prices, the path of global fuel prices, the next GDP release, and the Monetary Policy Board's voting split at its following meeting.