RBA lifts the cash rate to its highest since late 2011, and August inflation rises: what to watch next

The Reserve Bank of Australia raised the cash rate target by 25 basis points to 4.60% on 29 September 2026. The 29 September 2026 decision was the fourth hike of 2026 (RBA 29 Sep 2026; ABC News 29 Sep 2026) and took the cash rate to its highest level since late 2011 (RBA cash rate table; ABC News 29 Sep 2026). On 30 September 2026, the ABS reported that headline inflation rose to 4.0% in the 12 months to August 2026 (ABS 30 Sep 2026).

What did the RBA decide?

At its meeting on 29 September 2026, the Monetary Policy Board decided to increase the cash rate target by 25 basis points to 4.60% (RBA 29 Sep 2026). The new 4.60% target took effect on 30 September 2026 (RBA cash rate table). The RBA said the decision was unanimous, and ABC News reported that all nine members of the board voted in favour (RBA 29 Sep 2026; ABC News 29 Sep 2026).

The 29 September decision was the fourth increase of 2026. The RBA's cash rate table shows the target started the year at 3.60% and rose by 25 basis points at each increase, taking effect on 4 February, 18 March, 6 May and 30 September: a total of 100 basis points (RBA cash rate table). The last time the target was higher than 4.60% was in 2011, when it stood at 4.75% until a cut that took effect on 2 November 2011 (RBA cash rate table).

The Board's statement said: "The Board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed" (RBA 29 Sep 2026).

Why did the RBA hike again?

The Board's statement said: "Inflation remains elevated and some of the upside risks flagged in August are materialising" (RBA 29 Sep 2026). Among the reasons the Board gave (RBA 29 Sep 2026):

• Energy: the conflict in the Middle East has broadened, and global energy prices are now much higher than had been assumed in the August forecasts.
• Technology goods: AI-related demand is driving rapid growth in global prices for technology-related goods.
• Domestic capacity: there remains pressure on domestic capacity.
• Business pricing: liaison indicates that firms are experiencing cost pressures and are either increasing the prices of their goods and services or looking to do so.
• Inflation expectations: short-term measures of inflation expectations remain elevated.
• Inflation outcomes: recent inflation outcomes in Australia were stronger than expected at the previous meeting.

The 29 September statement also noted that housing prices have fallen in most capital cities and that new housing loans have declined noticeably. The Board still judged that inflation is too high and that "a further tightening in financial conditions is warranted to support a return of inflation to target in a reasonable period" (RBA 29 Sep 2026).

EY Oceania chief economist Cherelle Murphy told the ABC: "It's certainly going to hurt many households, this fourth interest rate hike. But from the Reserve Bank's point of view, certainly what they see is hurting more is inflation continuing to be too high" (ABC News 29 Sep 2026).

Commonwealth Bank head of Australian economics Belinda Allen said: "Higher interest rates make borrowing more expensive and saving more attractive." She added: "That tends to slow household spending and business investment, reducing some of the demand pressures in the economy and, over time, helping bring inflation back towards the RBA's 2–3 per cent target" (ABC explainer 29 Sep 2026).

What did the August CPI show?

The ABS released the Consumer Price Index for August 2026 on 30 September 2026 at 11:30am AEST (ABS 30 Sep 2026). In the 12 months to August 2026 (ABS 30 Sep 2026):

• Headline CPI rose 4.0%, up from 3.5% in the 12 months to July 2026.
• Trimmed mean inflation was 3.6%, unchanged from July.
• Housing rose 5.7%, with rents up 3.6% and new dwelling prices up 5.4%.
• Transport rose 5.6%. Automotive fuel prices rose 14.8% in the month of August alone, which the ABS put down to higher world oil prices and the unwinding of the remainder of the federal government's fuel excise relief.
• Electricity rose 13.2%, largely due to the ending of Commonwealth electricity rebates.

In August, automotive fuel and electricity were both excluded from the trimmed mean and were the key drivers of the difference between headline and trimmed mean inflation (ABS media release 30 Sep 2026). Capital Economics senior APAC economist Abhijit Surya said measures of core inflation didn't strengthen further in August, supporting Capital Economics' view that the RBA's tightening cycle is likely at an end (ABC live blog 30 Sep 2026).

Headline CPI at 4.0% and the trimmed mean at 3.6% were both above the RBA's 2–3% inflation target in the 12 months to August 2026 (ABS 30 Sep 2026; RBA).

What about the labour market?

The seasonally adjusted unemployment rate rose to 4.6% in August 2026 (ABS 24 Sep 2026). The Sydney Morning Herald noted that August's 4.6% unemployment rate was the highest in nearly five years (SMH 29 Sep 2026). The RBA's statement described labour market conditions as having "eased broadly as expected in recent months", with leading indicators "broadly stable" (RBA 29 Sep 2026).

What does it mean for mortgages and borrowing capacity?

Repayments. Canstar figures published by the ABC on 28 September 2026, before the decision, estimated that a 25 basis point September hike, if passed on in full by banks, would add $91 a month to repayments on a $600,000 loan, and that the four 2026 hikes would add $364 a month on the same loan (ABC 28 Sep 2026, citing Canstar).

Banks passing it on. Macquarie said on 29 September that it will increase its variable home loan reference rates by 0.25% p.a. from 15 October 2026 (Macquarie 29 Sep 2026). On 30 September, all four big banks (CBA, NAB, Westpac and ANZ) confirmed they will pass the hike on in full, lifting variable home loan rates by 0.25% p.a. from 9 October 2026 (ABC live blog 30 Sep 2026).

Borrowing capacity. Cotality estimates that, for a household on the median income, the four rate hikes since February have reduced borrowing capacity by almost $90,000, equivalent to about 9% (Cotality 29 Sep 2026). Canstar estimated, before the decision, that the four 2026 hikes would cut the borrowing capacity of someone on the average full-time wage of $108,650 by more than $47,000 since the start of 2026, and that of a couple both on average wages by nearly $95,000 (Canstar 28 Sep 2026; ABC explainer 29 Sep 2026).

What's happening to house prices and rents?

Cotality's national Home Value Index fell 1.1% in September 2026, the sixth straight month of falling values, leaving national dwelling values 5.2% below their record high from March 2026 (Cotality 1 Oct 2026). Sydney and Melbourne dwelling values were down 7.0% and 6.2% respectively over the 12 months to 30 September 2026 (Cotality 1 Oct 2026).

Cotality reported that the national rental vacancy rate reached 2.0% in September 2026, up from a record low of 1.5% in February 2026 and still well below the pre-COVID decade average of 3.3%. The monthly pace of rental growth eased to 0.3% in seasonally adjusted terms, taking the annual change in national rents to 5.5% (Cotality Home Value Index, 1 Oct 2026). The ABS reported rents up 3.6% in the 12 months to August 2026 (ABS 30 Sep 2026).

How are banks and economists reading November?

NAB's forecasts have the cash rate peaking at 4.6% (NAB 30 Sep 2026). CBA economist Trent Saunders said: "For now, we continue to expect the RBA to leave the cash rate unchanged in November. However, the decision remains finely balanced" (ABC live blog 30 Sep 2026). Before the decision, the majority of analysts surveyed by Bloomberg expected the RBA to be done with hikes for the rest of the year (ABC 28 Sep 2026; ABC explainer 29 Sep 2026).

ANZ, HSBC and UBS expect a further rise in November (ABC explainer 29 Sep 2026). ANZ head of Australian economics Adam Boyton said the unanimous decision and the hawkish tone of the post-meeting statement reinforced ANZ's forecast of a further hike (Broker Daily 30 Sep 2026). On 30 September 2026, Westpac changed its forecast to a November hike: chief economist Luci Ellis said a November hike is now the base case, "absent a lasting resolution of the Middle East conflict beforehand, or some other event that significantly lowers the outlook for energy-related costs in Australia" (Westpac IQ 30 Sep 2026). Betashares chief economist David Bassanese said: "it's now my base case that the RBA is now a short-priced favourite to raise rates by 25 basis points on Melbourne Cup Day, taking the cash rate to 4.85 per cent" (ABC News 29 Sep 2026).

The ABS releases the Consumer Price Index for September 2026, which includes the September-quarter figures, on 28 October 2026, the last CPI release before the Board's 3 November 2026 decision (ABS 30 Sep 2026; ABS release calendar).

What to watch next

Dates and times are from the RBA calendar, the ABS release calendar, Macquarie's announcement and the ABC's report of the big four banks' announcements.

• 9 October 2026: the big four banks' variable home loan rate increases take effect (ABC live blog 30 Sep 2026).
• 13 October 2026, 11:30am AEDT: minutes of the September 2026 Monetary Policy Board meeting (RBA Coming Up).
• 15 October 2026: Macquarie's variable home loan reference rate increase takes effect (Macquarie 29 Sep 2026).
• 15 October 2026, 11:30am AEDT: ABS Labour Force, September 2026 (ABS release calendar).
• 28 October 2026, 11:30am AEDT: ABS Consumer Price Index, September 2026, including the September-quarter figures (ABS release calendar).
• 3 November 2026, 2:30pm AEDT: next RBA cash rate decision, followed by the Governor's media conference at 3:30pm AEDT (RBA Coming Up).

Sources

1. Reserve Bank of Australia (media release 2026-27) — Statement by the Monetary Policy Board: Monetary Policy Decision (29 Sep 2026) — https://www.rba.gov.au/media-releases/2026/mr-26-27.html
2. Reserve Bank of Australia — Cash Rate Target (accessed 1 Oct 2026) — https://www.rba.gov.au/statistics/cash-rate/
3. Reserve Bank of Australia — Coming Up (accessed 1 Oct 2026) — https://www.rba.gov.au/coming-up/
4. Reserve Bank of Australia — About Monetary Policy (accessed 1 Oct 2026) — https://www.rba.gov.au/monetary-policy/about.html
5. Australian Bureau of Statistics — Consumer Price Index, Australia, August 2026 (30 Sep 2026) — https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/aug-2026
6. Australian Bureau of Statistics (media release) — CPI rose 4.0% in the year to August 2026 (30 Sep 2026) — https://www.abs.gov.au/media-centre/media-releases/cpi-rose-40-year-august-2026
7. Australian Bureau of Statistics (media release) — Unemployment rate rises to 4.6% in August (24 Sep 2026) — https://www.abs.gov.au/media-centre/media-releases/unemployment-rate-rises-46-august
8. Australian Bureau of Statistics — Future release - October 2026 — https://www.abs.gov.au/release-calendar/future-releases/202610
9. ABC News — RBA lifts interest rates to highest level in 15 years (29 Sep 2026) — https://www.abc.net.au/news/2026-09-29/rba-lifts-rates-highest-level-in-15-years-september-2026/107206640
10. ABC explainer — What an interest rate hike means for your mortgage, savings account and the Australian dollar (29 Sep 2026) — https://www.abc.net.au/news/2026-09-29/what-the-rba-cash-rate-hike-means-for-mortgages-rents-savings/107203364
11. ABC News — Interest rates likely to rise tomorrow, but is a second sting coming before Christmas? (28 Sep 2026) — https://www.abc.net.au/news/2026-09-28/interest-preview-ahead-of-sept-29-meeting/107196596
12. ABC live blog — ASX jumps as traders cut bets on November rate rise as big banks pass on RBA decision — as it happened (30 Sep 2026) — https://www.abc.net.au/news/2026-09-30/asx-markets-business-live-news/107210136
13. The Sydney Morning Herald — RBA governor warns there could be further rate hikes, even if it tips Australia into recession (29 Sep 2026) — https://www.smh.com.au/politics/federal/rba-hikes-interest-rates-to-4-6-per-cent-in-15-year-high-20260929-p6119t.html
14. Cotality — RBA rate hike deepens housing market headwinds as borrowing power shrinks (29 Sep 2026) — https://www.cotality.com/au/insights/articles/rba-rate-hike-deepens-housing-market-headwinds-as-borrowing-power-shrinks
15. Cotality — Australian housing values down for sixth straight month in September (1 Oct 2026) — https://www.cotality.com/au/insights/articles/australian-housing-values-down-for-sixth-straight-month-in-september
16. Cotality — Home Value Index, index results as at 30 September 2026 (1 Oct 2026) — https://discover.cotality.com/hubfs/Article-Reports/COTALITY%20HVI%20OCT%202026%20FINAL.pdf
17. Broker Daily — Four 2026 rate hikes deal $90k blow to borrowing capacity (30 Sep 2026) — https://www.brokerdaily.au/economy/22073-four-2026-rate-hikes-deal-90k-blow-to-borrowing-capacity
18. Canstar — Home buyers in for another budget cut: what a Tuesday hike might mean for property (28 Sep 2026) — https://www.canstar.com.au/news/what-tuesday-hike-might-mean-for-property/
19. Macquarie — Macquarie Bank's response to the RBA's interest rate decision (29 Sep 2026) — https://www.macquarie.com/au/en/about/news/2026/macquarie-banks-response-to-the-rba-interest-rate-decision.html
20. NAB — NAB RBA Watch: RBA hikes by 25bps as expected (30 Sep 2026) — https://www.nab.com.au/news/economy-markets/nab-rba-watch--rba-hikes-by-25bps-as-expected
21. Westpac IQ — RBA hikes in September, November follow-up now expected (30 Sep 2026) — https://www.westpaciq.com.au/economics/2026/09/rba-decision-29-September-2026