Key Highlights

  • The Board has lifted the cash rate target four times in 2026, taking it to 4.60 per cent, a cumulative 100 basis points.
  • Its September statement said it remains prepared to respond, including increasing the cash rate target further if needed.
  • Offsetting factors include policy lags, a rise in unemployment, falling housing prices and moderating household spending growth.

The Reserve Bank has raised rates four times this year and says it will tighten further "if needed"; this explainer sets the Board's language beside September's inflation figures without guessing the outcome.

Is a fifth rate rise for 2026 on the way? It is the question many borrowers are asking, and it is one this article will not answer, because the Reserve Bank of Australia's (RBA) Monetary Policy Board has not yet made its decision. What can be done is to line up exactly what the Board and its senior officials have said against the data that have arrived since, and to identify the considerations that point in different directions.

The Board meets on 2–3 November, with its decision due at 2.30 pm (AEDT) on 3 November.

Four rises so far

The Board has lifted the cash rate target four times this year, most recently by 25 basis points on 29 September, taking it to 4.60 per cent. The cumulative increase in 2026 is 100 basis points, or one full percentage point. The September decision was unanimous.

Assistant Governor (Economic) Sarah Hunter summarised it simply in her 60 Minutes interview, broadcast on 25 October: "the Board have put through four rate hikes this year".

What the Board has said

The Board's September statement offers the clearest guide to how it is thinking. Its key phrases are worth reading closely:

  • "Inflation remains elevated and some of the upside risks flagged in August are materialising."
  • "global energy prices are now much higher than had been assumed in the August forecasts."
  • "the Board judged that, in light of recent developments, a further tightening in financial conditions is warranted"
  • It remained prepared to respond, "including increasing the cash rate target further if needed"
  • "the Board will be attentive to the data and the evolving assessment of the outlook and risks"

The language is conditional. "If needed" leaves room for the Board to act or to hold, depending on its assessment. Governor Michele Bullock reinforced both the resolve and the conditionality at her 29 September media conference: "The Board will increase interest rates again if that's what's needed to get inflation down." In the same appearance she said: "I'm not going to give you forward guidance."

What the new data show

Since that statement, the most important new information is the Australian Bureau of Statistics' (ABS) Consumer Price Index for September, released on 28 October.

Headline inflation rose to 4.3 per cent over the 12 months to September, up from 4.0 per cent in August. Underlying inflation, measured by the trimmed mean, rose to 3.6 per cent from a revised 3.5 per cent. The monthly trimmed mean was 0.3 per cent, seasonally adjusted. CPI excluding volatile items was 3.7 per cent. All of these are above the 2–3 per cent target range.

Energy was a large contributor. Automotive fuel rose 23.6 per cent over the year, driven by higher world oil prices, while electricity rose 12.8 per cent, mainly because Commonwealth electricity rebates ended. But the pressure was not confined to energy: goods prices were up 4.6 per cent and services 4.1 per cent over the year.

The Governor's opening statement to the Senate Economics Legislation Committee on 28 October added further context. She said that "Inflation will therefore likely be higher than was our base case in August", noted that the Middle East conflict has re-escalated, and said short-term inflation expectations are elevated. Earlier, at the September media conference, she had stressed: "It's critical that we stop expectations for high inflation from becoming embedded in price-setting decisions".

Considerations that cut the other way

Set against those inflation signals are several factors the RBA itself has highlighted.

Policy lags. The Governor told senators the full effects of recent rate rises are yet to be felt. With four increases this year, some of their impact on spending and borrowing is still working through.

Labour market. The Governor referred to "the unemployment rate recently rising a little more than we had expected". She also said the labour market appears slightly tighter than previously judged, and the share of the population with a job remains high, so this consideration is itself mixed.

Housing and credit. Housing prices have fallen in most capital cities and new housing loans have declined.

Growth. Household spending growth is moderating only gradually. Hunter said on recession signs: "We don't see any signs of that yet in any of the data that we track." She added that "We're not trying to achieve a sharp stop or a really big downturn or anything like that."

Household resilience. The RBA's October Financial Stability Review estimated around 2 per cent of variable-rate owner-occupiers have a cash-flow shortfall, and said "Most Australian households with mortgages remain well placed to manage more difficult conditions". At the same time, Bullock acknowledged in September: "But at an individual level, yes, there are households that are hurting."

Hunter also cautioned that oil-driven price pressure is still coming through, with things likely to get "a little bit" worse before they improve, while declining to signal the next decision.

The bottom line

On the Board's own words, a further rate rise is something it has explicitly kept on the table, conditional on need. On the new data, inflation has moved further above target on both headline and underlying measures, and the Governor has flagged that the August inflation forecast is likely too low. On the other hand, the lagged effects of 100 basis points of tightening, a rise in unemployment a little faster than expected and a cooling housing market are all part of the Board's assessment.

How the Board weighs these will be known on 3 November, when the decision and a new Statement on Monetary Policy are released together, followed by a 3.30 pm media conference. Until then, the honest answer to the headline's question is that it remains undecided. Borrowers may wish to understand how a change, or no change, in the cash rate would flow through to their own circumstances.