RBA lifts the cash rate to 4.60 per cent, a 15-year high

The Reserve Bank of Australia lifted the cash rate by 25 basis points to 4.60 per cent on Tuesday, ending a two-meeting pause.

The decision was unanimous. In May, the last time the board raised rates, one member had voted to hold.

The decision was widely expected. All four major banks forecast it, a Reuters poll found 33 of 34 economists expecting a rise, and financial markets had priced it at better than 90 per cent for more than a week.

What the board said

Inflation was the reason, again.

The three increases in the cash rate target since the beginning of the year have tightened financial conditions and the economy appears to be slowing. But inflation is still too high and the Board judged that, in light of recent developments, a further tightening in financial conditions is warranted to support a return of inflation to target in a reasonable period.

RBA Monetary Policy Board statement, 29 September 2026

The board said some of the upside risks it flagged in August "are materialising". The conflict in the Middle East has broadened, global energy prices are now much higher than assumed in the August forecasts, and higher fuel prices have partly flowed through to other goods and services. It also noted that "housing prices have fallen in most capital cities and new housing loans have declined noticeably", and repeated that it will increase the cash rate "further if needed".

Headline inflation was 3.5 per cent over the year to July. Trimmed mean inflation, the bank’s preferred gauge, sat at 3.6 per cent. Both remain above the 2 to 3 per cent target band, and the bank has now raised rates on four occasions in 2026 without getting the underlying measure to fall meaningfully.

Four rises in one year

The cash rate started 2026 at 3.60 per cent. Three increases in the first five months took it to 4.35 per cent in May, where it sat through the July and August meetings. Tuesday’s move adds a fourth.

That is a full percentage point in nine months. Australia is now one of very few developed economies still tightening, and its policy rate is among the highest of them.

What it costs a borrower

If lenders pass the full 0.25 points on, and they historically do, a typical variable rate moves from about 6.25 per cent to about 6.50 per cent. On a 30-year principal and interest loan, that works out as follows.

Most lenders apply variable rate changes within two weeks of an RBA decision. Borrowers on fixed rates are unaffected until their fixed term ends, though fixed lending now makes up a very small share of new loans.

Borrowing power takes the bigger hit

Repayments rise by a little over a hundred dollars a month on an average loan. The larger effect sits with buyers who have not bought yet.

Lenders assess new loans at the actual rate plus a 3 percentage point buffer. When the rate rises, the maximum loan a given income supports falls. After Tuesday’s increase, a buyer who qualified for $800,000 last week qualifies for roughly $782,700, about $17,300 less. At $1,000,000 the reduction is close to $21,600.

Across four increases this year, that compounds. A borrower assessed in January at 3.60 per cent now faces a serviceability rate a full point higher.

A housing market already going backwards

The rise lands on a housing market that is already falling. Cotality’s national Home Value Index fell 0.9 per cent in August, the fifth consecutive monthly decline, leaving national values 3.6 per cent below their March peak.

Sydney is leading the correction, down 1.4 per cent in August and 7.1 per cent below its peak. Brisbane, Melbourne, Perth and Adelaide all recorded falls of between 0.8 and 1.2 per cent over the same period, and 93 per cent of capital city suburbs lost value through winter.

Homes are also taking longer to sell. The national median time on market was 39 days in August, against 28 days a year earlier.

Ahead of the decision, Domain chief of research and economics Dr Nicola Powell warned that higher rates could also slow the delivery of new housing, with construction capacity already stretched by infrastructure and energy projects.

What happens next

Governor Michele Bullock holds a media conference at 3.30pm AEST.

Most economists now see 4.60 per cent as the peak. That view is not unanimous. ANZ forecasts a fifth increase in November to 4.85 per cent, and CBA has flagged a follow-up rise if September quarter trimmed mean inflation comes in at 1 per cent or more for the quarter.

The September quarter CPI, due in late October, is therefore the next number that matters. The board meets again in November.

This article is general information about a monetary policy decision. It is not financial, investment or property advice. Figures are as reported on 29 September 2026. Repayment and borrowing power figures are illustrations based on the assumptions stated.