Reserve Bank of Australia Raises Rates to 18-Year High

The Reserve Bank of Australia raised the cash rate by 25 basis points to 4.85 per cent on November 3, 2026, marking the fifth increase this year and the highest level since 2008. The board reached the decision in a 6-3 split vote, citing domestic capacity pressures, an artificial intelligence investment boom, and higher energy prices linked to conflict in the Middle East. Revised forecasts project headline inflation will reach 4.5 per cent by December 2026 and remain above the 2-3 per cent target range until the end of 2027.

Governor Michele Bullock stated that while a technical recession is not anticipated, current economic pain is necessary to prevent worse outcomes. The bank expects unemployment to climb to 5.1 per cent by the end of 2028 and predicts real wages will decline by one per cent in 2026. The hike is expected to push average owner-occupier variable mortgage rates to 6.74 per cent, with major banks likely passing on the increase by mid-November.

Political pressure is mounting for Treasurer Jim Chalmers to implement spending cuts in the December mid-year budget update. While Chalmers noted the government has found nearly $180 billion in savings since taking office, Shadow Treasurer Tim Wilson argued the government will not deliver sufficient cuts to curb inflation. In the Illawarra region, New South Wales Premier Chris Minns warned the rise could lead to permanent business closures and job losses, as small business owners report foregoing wages to maintain operations.