Reserve Bank of Australia Raises Cash Rate to 18-Year High

The Reserve Bank of Australia raised its official cash rate by 25 basis points to 4.85 percent on November 2, 2026. This decision, reached via a split 6-3 board vote, marks an 18-year high and the fifth increase this year. The bank cited revised inflation outlooks, higher oil prices, and increased spending on artificial intelligence infrastructure as primary drivers for the tightening. Consequently, the bank increased its end-2026 CPI forecast to 4.7 percent from 3.6 percent.

The hike comes amid a sharp housing market slowdown. The Commonwealth Bank predicts the largest downturn on record, with national prices expected to fall 8 percent this year, following an existing 6.7 percent drop. New South Wales Premier Chris Minns warned that these increases could be "devastating for a lot of businesses and many families."

Prime Minister Anthony Albanese and Finance Minister Katy Gallagher defended government spending, attributing inflation to global pressures. Treasurer Jim Chalmers stated the government has found nearly $180 billion in savings since taking office and pledged further cuts in the December mid-year budget update. However, the Business Council of Australia urged the government to reduce spending further to align with the central bank's efforts.

In separate developments, British Prime Minister Andy Burnham invited Prime Minister Albanese to northern England next year for the first steel cut of an AUKUS submarine. Meanwhile, the United States conducted defensive strikes on Iran's Qeshm Island to counter surface-to-air missile threats.