The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.85% at its meeting today, and the new rate takes effect on 4 November. A 4.85% cash rate has not been seen since 2008, according to the live coverage of ABC News.
The decision was not unanimous. Six members of the Monetary Policy Board voted for the increase and three voted to leave the target at 4.60%, the RBA said. Its decision at the end of September, which took the rate to 4.60%, had been unanimous.
INFLATION OUTLOOK REVISED HIGHER
The board said inflation in many goods and services remains high, that capacity pressures appear a little tighter than previously estimated and that there are indications higher fuel prices are being passed through to the prices of other goods and services. AI-related investment is also driving rapid growth in prices for technology-related goods, it said.
The board warned of an increasing risk that higher inflation expectations will become embedded, judged that a further tightening in financial conditions is warranted, and said it will continue to do what it considers necessary to bring inflation sustainably back to target.
FIVE RISES SINCE FEBRUARY
The economy is slowing, the RBA said. Housing prices in September were almost 5% below their March peak, which the RBA attributed to higher interest rates and tax changes announced in the federal budget, and the unemployment rate rose by more than expected to average 4.6% in the September quarter. The RBA forecasts unemployment to rise to a bit over 5% by end-2028.
Not every indicator points the same way. Business credit growth remains strong and corporate risk premia remain low, the RBA said, and it described the current level of the cash rate as slightly above the top of the range of central estimates of the neutral rate. Ahead of the November meeting, market pricing implied around one and a half further increases by mid-next year. Governor Michele Bullock was due to hold a press conference at 3:30pm.
THE TGB VIEW
The four majors, Commonwealth Bank, Westpac, National Australia Bank and ANZ, held A$5.13tn of assets at June 2026, about 73% of Australian banking, according to the TGB market profile; in the TGB global rankings Commonwealth Bank ranks 44th, ANZ 46th, Westpac 54th and National Australia Bank 55th. Westpac's results on Monday showed average monthly mortgage applications 15% lower in the fourth quarter than a year earlier, after the government's tax changes, and its core net interest margin 5 basis points lower than last year at 1.76%. The next test comes on Thursday 5 November, when National Australia Bank reports full-year results, and the minutes of this meeting are published two weeks later.
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