Anyone hoping for quick rate relief got a sobering timetable from the Reserve Bank on Tuesday. The RBA now expects Inflation to stay above its target band until late 2027, which puts any meaningful easing after 1 July 2027, the date the new Capital Gains Tax and negative gearing rules begin. For property investors weighing a purchase, that means planning for high borrowing costs and a new tax regime arriving together.

The RBA's new inflation timeline

Alongside its decision to lift the cash rate by 25 basis points to 4.85% on 3 November, the RBA said inflation "is not expected to reach the top of the 2–3 per cent target range until late 2027".

According to the board, that is about three quarters later than previously forecast.

The statement said inflation is "now forecast to remain elevated through much of 2027", and that the board expects it to remain above 3% over the coming year. Annual CPI inflation was 4.3% in September, according to the Treasurer's 28 October release.

The board also flagged "an increasing risk that higher inflation expectations will become embedded". The revised outlook is partly due to fuel and Commodity prices linked to the conflict in the Middle East.

Those worries echo remarks by Deputy Governor Andrew Hauser on 21 October. He told an audience the inflation outlook was "materially worse" than forecast, and called shifting expectations "the central banker's nightmare".

What starts on 1 July 2027

The rate outlook now overlaps with two major tax changes already legislated in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received assent on 26 June 2026.

First, for gains accruing from 1 July 2027, cost-base indexation plus a 30% minimum tax replace the 50% CGT discount. The change is not a "30% discount". It combines inflation adjustment of the cost base with a minimum rate of tax on the taxable gain.

Second, negative gearing is limited to new builds for properties bought after 7:30pm AEST on 12 May 2026, with that limit applying from 1 July 2027. Investors who held established property before the cut-off are grandfathered.

Follow-up legislation is still working through Parliament. The Tax Reform No. 3 Bill, which passed the House on 29 October, carries a further CGT Tranche and defines a "new residential dwelling" for negative gearing purposes. A Senate committee is due to hold hearings on 5–6 November and report on 13 November.

Why sticky inflation matters under indexation

Indexation is the part of the new regime most directly linked to the inflation outlook.

The principle is straightforward. Rather than taxing the whole nominal gain and then halving it, the cost base is adjusted for inflation, so the portion of a gain that merely keeps pace with rising prices is not treated as profit.

That means the inflation path the RBA has just described will feed into investors' future tax calculations, but only for gains accruing from 1 July 2027. Gains that accrued before that date fall under the existing rules, including the 50% discount for eligible Assets held for more than 12 months. Investors who already hold assets may therefore end up with two parts to a single future gain, worked out under different rules.

Hypothetical example: Imagine an investor whose asset has a cost base of $500,000 at the start of the new regime. If inflation ran at 3% over a year, indexation would lift the cost base by $15,000 to $515,000. If the asset were then sold for $540,000, only the $25,000 above the indexed cost base would be counted as a real gain, rather than the full $40,000 nominal increase.

This is a simplified illustration. The precise indexation method, how values are set at the start date, and how the 30% minimum tax applies to a given taxpayer depend on the legislation and on later tranches.

What economists expect for rates

Bank forecasts suggest any easing is still a long way off, and some see more hikes first. These are forecasts and could change quickly.

CBA expects a hold at 4.85%, then 25 basis point cuts in August and November 2027. On 28 October, CBA's Belinda Allen called November "an insurance hike" and said cuts in 2027 depend on whether "enough progress has been made".

Others lean the other way. ANZ sees a "material risk" the cash rate reaches 5.10% in December or February, while Westpac says the risk of a February rise is increasing.

On CBA's timeline, the first cut would come about a month after the new tax rules start.

What this means for investors deciding now

For anyone considering an established property purchase today, the combination is unusual. They would face current borrowing costs and, from 1 July 2027, no ability to negatively gear that established property against other income.

New builds sit differently. Properties that meet the new-dwelling definition remain eligible for negative gearing, though the final definition is still in a bill before Parliament.

Meanwhile, the RBA said higher rates and falling housing prices and turnover are expected to weigh on dwelling Investment and household consumption. It also flagged "uncertainties about the extent and economic effects of the downturn in the housing market."

The board's statement also noted that "housing prices have fallen significantly and the Unemployment rate has risen".

None of this tells an individual whether to buy, sell or hold. It does suggest that Cash Flow assumptions built on rates falling soon may be optimistic, if the RBA's outlook proves correct.

Key dates to watch

  • 4 November: RBA Chart Pack release.
  • 5 November: Andrew Hauser's Sir Leslie Melville Lecture at ANU.
  • 5–6 November: Senate committee hearings on the Tax Reform No. 3 Bill, with the report due 13 November.
  • 25 November: the next monthly CPI release, the first inflation read after the hike.
  • December: the government's Mid-Year Economic and Fiscal Outlook.
  • 1 July 2027: indexation, the 30% minimum tax and the negative gearing limit commence.
  • August 2027: CBA's tipped date for a first rate cut.