RBA Raises Cash Rate to 4.60%: Australia's Highest Interest Rate in 15 Years

The Reserve Bank of Australia has done it again. Wrapping up its September policy meeting on Tuesday, the RBA board voted unanimously to raise the official cash rate to 4.60% — a 25-basis-point increase that takes Australian borrowing costs to a 15-year high. The message was brutally simple: inflation is still too high, and the bank is prepared to keep tightening until that changes.

This is the fourth rate hike of 2026, following quarter-point moves in February, March and May. The cash rate has now climbed a full percentage point this year, from 4.35% — the highest since October 2011 — a 15-

year peak

Image: Reserve Bank of Australia's Sydney headquarters — Wikimedia Commons (CC BY-SA 4.0, Nick-D)

Why the RBA hiked again

In its accompanying statement, the nine-member board said "some of the upside risks to inflation are materialising" — central-bank speak for things are getting worse, not better. Core inflation is running at 3.6%, well above the bank's 2–3% target band, and July's annual CPI print of 3.5% came in hotter than expected.

The drivers are a messy cocktail of global and domestic pressures. The unresolved Middle East conflict has disrupted oil supply and pushed Brent crude nearly 20% higher since the RBA's August meeting, keeping energy costs elevated. Meanwhile, the AI investment boom is stoking demand for technology-related goods, and closer to home, firms are reporting rising input costs — and passing them straight through to customers. Productivity stays weak and domestic capacity pressures persist.

Markets saw it coming — but what's next?

I'll be honest: this hike surprised almost nobody — market pricing had put the odds above 90% going into the meeting. With the outcome priced in, attention shifted to the statement — and its tone was unmistakably hawkish.

"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," the statement read. Markets are now pricing roughly a 43% chance of another hike at the November meeting (2–3 November), which would lift the cash rate to 4.85% — the highest since 2008. Some economists, including ANZ, are already calling it.

Reaction in markets was muted but telling. The S&P/ASX 200 edged down 0.16% to trade near 8,674, while the Australian dollar held near multi-month lows around US$0.70, after a brief knee-jerk jump on the announcement.

Image: Sydney's financial district — Wikimedia Commons (CC BY-SA 4.0)

What it means for borrowers

For households, the arithmetic is unforgiving. On a $500,000 home loan, this hike adds roughly $80 a month to minimum repayments, according to industry estimates — and that's on top of three earlier increases this year. The big banks are widely expected to pass the hike on to variable-rate borrowers in full, as they have with each prior move.

There is one small comfort. RBA Governor Michele Bullock told a parliamentary committee recently that households are not under widespread stress, pointing to resilient employment and the fact that around 40% of mortgage holders sit on two years' worth of repayments in offset accounts. But as senior economist Eleanor Creagh warned, higher repayments will bite at a time when elevated living costs are already squeezing budgets.

Treasurer Jim Chalmers laid the blame squarely overseas: "Australian workers didn't choose this war, but they are paying a hefty price for it. The war has been a disaster for the global economy."

The bottom line

Australia's central bank has joined the growing list of global policymakers fighting inflation with higher-for-longer rates. With two more meetings before Christmas and inflation risks tilted upward, borrowers should brace for the possibility that 4.60% isn't the ceiling — and the next RBA meeting in November is one to watch.