Reserve Bank of Australia Raises Cash Rate to 4.85%

The Reserve Bank of Australia raised the official cash rate by 25 basis points to 4.85% on November 3, 2026, marking the fifth increase this year and the highest level since 2008. The decision followed a split 6-3 board vote, with three members opposing the hike due to concerns over rising unemployment and economic stress. Governor Michele Bullock stated the move is critical to prevent high inflation expectations from becoming embedded in the economy, citing drivers such as the artificial intelligence investment boom, domestic capacity pressures, and higher energy prices linked to conflicts in the Middle East and Ukraine.

The hike has intensified a sharp housing market downturn, with national property prices falling 6.7% since February. Analysts warn the increase will further constrain borrowing capacity and could trigger a property market bloodbath. In regions like Illawarra and Canberra, homeowners face significant increases in monthly repayments, while some small businesses are reducing trading hours or foregoing wages to survive.

Prime Minister Anthony Albanese and Treasurer Jim Chalmers defended the government's fiscal management, pledging further budget savings in December. However, the Business Council of Australia and Shadow Treasurer Tim Wilson urged deeper spending cuts to align with the central bank's efforts. Meanwhile, economic adviser Warren Hogan warned that rates could potentially climb to 6.5%, which he suggests would trigger a recession. In separate diplomatic news, Prime Minister Andy Burnham of the United Kingdom invited Albanese to witness the first steel cut for an AUKUS submarine next year.