Sydney: Reserve Bank of Australia Lifts Cash Rate to 4.85%, an 18-Year High, in Fifth Hike of 2026

The Reserve Bank of Australia (RBA) on November 3 raised the cash rate by 25 basis points to 4.85%, its fifth increase of 2026 and the highest level since late 2008, about 18 years. The decision passed by six votes to three, with three board members preferring to hold at 4.60%. The next decision is scheduled for December 8. (Photo: file image of the Reserve Bank of Australia building.)

Inflation still high, and falling more slowly

In its statement, the RBA said inflation remains elevated and broadly based, capacity pressures look a little tighter than previously estimated, and higher fuel prices are being passed through to other goods and services. Australian Bureau of Statistics data put headline inflation at 4.3% in the year to September, up from 4.0% in the year to August, while trimmed-mean inflation was 3.6% in September, both above the RBA's 2% to 3% target range. The bank's new forecasts have inflation staying above 3% for the coming year and not reaching the top of the target range until late 2027, about three quarters later than forecast in August.

A split board: six for, three against

Six of the nine Monetary Policy Board members voted for the increase and three voted to hold. The bank said that, given the revised inflation outlook and continuing upside risks, further tightening was warranted to support inflation's return to target, while acknowledging a slowing economy, cooling housing prices and rising unemployment, through which tighter policy works by restraining household spending and demand.

What it means for borrowers

The rise will flow into variable mortgage costs. Mortgage Choice cited estimates that minimum repayments on a A$750,000 home loan could rise by about A$120, depending on how fully lenders pass the increase on. The RBA committed to neither another rise nor a hold, saying future decisions will depend on incoming data and how the inflation outlook develops.

Sources: Reserve Bank of Australia monetary policy decision statement, November 3 (via Reuters), Australian Bureau of Statistics, Aussie, Broker Daily, Mortgage Choice.