The RBA's quarterly forecast document reads as an account of risks that were flagged in August and have since come true, and it explains much of the reasoning behind the November rate rise.

Every quarter, the Reserve Bank publishes its Statement on Monetary Policy (SMP), setting out how it sees the economy and where it expects inflation, Unemployment and growth to head. The November 2026 edition, released at 2.30 pm AEDT on 3 November alongside the Monetary Policy Board's decision, opens with an unusually stark sentence: "Inflation in Australia remains well above target and a number of upside risks have crystallised since the August Statement."

The same afternoon, the Board raised the cash rate target by 25 basis points to 4.85%, effective 4 November — the fifth increase of 2026. The vote was six to three, with three members preferring to hold at 4.60%. Reading the SMP helps explain both the decision and why it was contested.

What "crystallised" means here

In Central Bank language, an upside risk to Inflation is something that could push prices higher than the central forecast. In August, the RBA set out a forecast and a list of things that could make it wrong. "Crystallised" means several of those things have actually happened.

This was not a new theme in November. The minutes of the 29 September meeting, when the Board lifted the cash rate from 4.35% to 4.60%, recorded: "The strongest argument for raising the cash rate target at this meeting was that several of the upside risks identified in August had since materialised or were building."

Based on the decision statement and recent RBA commentary, the risks that have materialised can be grouped as follows:

  • Energy. Higher fuel and Commodity prices linked to the conflict in the Middle East. Deputy Governor Andrew Hauser said on 21 October that oil was above $100 a barrel, about a third higher than the August assumption.
  • Capacity. Demand running further ahead of Supply than thought, with the September minutes noting "excess demand was greater than previously assessed."
  • Technology prices. AI-related Investment pushing up the prices of technology goods.
  • Expectations. Some measures of inflation expectations have risen lately.

The forecasts in brief

The SMP's central forecasts reflect those developments. Headline CPI inflation is forecast at 4.5% over the year to December 2026, up from 3.6% in August. The trimmed mean, the RBA's preferred underlying measure, is forecast at 3.6% for the same period, up from 3.3%.

The SMP states that "Headline and underlying inflation are expected to remain above 3 per cent until end-2027". Its forecast table shows headline at 2.7% and the trimmed mean at 2.9% by December 2027, so in practice inflation stays above 3% through much of 2027 before easing. By December 2028, both measures are forecast at 2.4%.

The latest actual data are: monthly headline CPI of 4.3% year-ended in September 2026, and a trimmed mean of 3.7% year-ended in the September quarter. Those are distinct measures.

On activity, unemployment is forecast to rise to 4.7% by December 2026 and 5.1% by December 2028. GDP growth is forecast at 1.6% over the year to December 2026, slowing to 1.3% over the year to December 2027.

Forecasts are only as good as their inputs, and the SMP is explicit about the key ones.

The cash rate assumption is taken from market pricing as at 28 October, with year-average rates of 4.7% for 2026, 4.9% for 2026/27 and 4.8% for each of 2027, 2027/28 and 2028. That is the market's view, not a promise from the RBA.

The trade-weighted Exchange Rate is held at its 28 October level, around 65.3 in the forecast years, and the Australian dollar is judged to be around its long-run equilibrium. Energy prices are assumed to decline from elevated levels — though the SMP warns they could stay high or rise if shipping and refining disruptions persist.

The Bank also stresses heightened uncertainty, setting out scenarios in which inflation is higher and activity lower than in the central case.

Restrictive conditions, slowing growth

Two other SMP lines frame the policy setting. The first: "Financial conditions are judged to be restrictive." In other words, the RBA considers that interest rates and broader financial conditions are already acting as a brake on spending.

The second: "Tighter monetary policy alongside a weaker outlook for the housing market is expected to keep GDP growth below trend." The decision statement adds that "housing prices have fallen significantly and the unemployment rate has risen," and that "Higher interest rates and falls in housing prices and turnover are expected to weigh on growth".

At the same time, the SMP says: "The economy is currently operating with excess demand and is judged to reach balance next year". That is the core tension. The economy is slowing, but from a position where demand was running too hot, which keeps pressure on prices.

Why the risks pushed the Board to act

The SMP shows that the Board weighed a slowing economy against inflation that has proved more stubborn than expected. The decision statement gives a sense of the balance it struck: "there is an increasing risk that higher inflation expectations will become embedded." It also says: "The Board is conscious of the period in which inflation has been too high."

Hauser had previewed that logic in October: "We can't allow expectations to shift away from the target." Assistant Governor Sarah Hunter, in an interview aired on 25 October, said: "We don't want to live with high inflation for a long time."

The three members who preferred to hold were outvoted, but the split itself underlines how finely balanced the arguments have become.

The bottom line

The November SMP is, at its heart, a document about risks that came true: higher energy prices, more excess demand than thought, rising technology goods prices and some upward drift in inflation expectations. Those developments pushed the RBA's inflation forecasts sharply higher and underpinned the Board's majority decision to lift the cash rate to 4.85%. The forecasts rest on market-based rate assumptions and an expected easing in energy prices, both of which could change. The next tests are the monthly CPI on 25 November 2026 and the Board's 8 December decision. Readers who want to understand what this means for their own finances can consider speaking with a licensed adviser or their lender.