RBA raises cash rate to 4.85%, an 18-year high, in split 6-3 vote; fifth hike of 2026

The Reserve Bank of Australia raised its cash rate by a quarter of a percentage point to 4.85% on Tuesday, November 3, taking borrowing costs to their highest level since late 2008. It was the fifth rate rise of 2026, and the board was split: six members voted for the increase and three wanted to hold at 4.60%.

The decision came at 2:30pm in Sydney (8:30am in Pakistan), half an hour before the Melbourne Cup. Markets had priced in close to a 90% chance of a rise, and all four big banks had predicted one.

Why the RBA raised rates again

The board's message was that inflation is worse and lasting longer than it expected. "Inflation remains elevated and recent data indicate that it is broadly based," its statement said. The staff forecasts have been revised "materially higher". Inflation is now expected to stay high through much of 2027 and not to fall to the top of the 2-3% target range until late 2027, about three quarters later than the bank forecast in August.

The latest figures explain the worry. Headline consumer prices rose 4.3% in the year to September, up from 4.0% in August, driven by construction, electricity and petrol. Underlying inflation has been above the target band for 14 months in a row. The board pointed to fuel and commodity costs from the war in the Middle East, and to rising prices for technology goods as AI-related investment soaks up chips and equipment. It also warned that some measures of inflation expectations have risen. Central bankers fear this most, because people who expect higher prices push for higher wages and charge more.

The bank also admitted the economy is under strain. "The economy is slowing, housing prices have fallen significantly and the unemployment rate has risen," the statement said, and it expects unemployment to rise further than it forecast in August.

What the rise costs borrowers

Loan (variable, 25 years left)	Extra per month from this rise	Extra per month from all 2026 rises
$600,000	about $92	about $456
$1,000,000	about $150	about $737 (vs January)

Estimates assume the banks pass on the full rise. Figures in Australian dollars.

On a $600,000 loan, this year's rises add up to almost $5,500 a year in extra repayments. The comparison site Canstar estimates that a single person on the average full-time wage of $108,650 can now borrow more than $58,000 less than at the start of the year, and a couple on average wages nearly $117,000 less.

Banks had not announced their new mortgage rates within the first hour. After the first four rises this year, the big four passed them on in full within a day. Fixed-rate borrowers are not affected until their fixed term ends. Savers will see higher rates on some accounts, but many high-interest accounts only pay the top rate if conditions are met.

A divided board and a worried Treasurer

The three votes to hold show the board is close to the point where it thinks rates are high enough. The Australian dollar slipped 0.3% to about 69.8 US cents after the announcement, because traders read the split vote as a sign that this may be the last rise.

Treasurer Jim Chalmers said the decision was "widely anticipated but not unanimous", which he said was unsurprising given "risks in both directions". He said the rise would make it harder for families and businesses to cope, and that Australians are paying a heavy price for the war in the Middle East. Shadow Treasurer Tim Wilson blamed government spending for keeping inflation high. Governor Michele Bullock was due to explain the decision at a press conference at 3:30pm Sydney time.

Is this the last rise?

Economists are divided. Several bank forecasters expected November to be the final rise and see the first cut around August 2027. One of the big four warned there is some risk the rate reaches 5.10% in December or February. House prices are already falling: the national median is down 2.8% over the past year, and one bank expects a 14% fall from peak to trough.

Australia is not alone. Central banks from Asia to Europe are trying to stop high oil prices, caused by the Hormuz blockade, from feeding into wages and broader prices. The RBA meets again on Tuesday, December 8, its last decision of the year.