RBA Lifts Cash Rate to 4.60% on September 29, Highest Since 2011

The Reserve Bank of Australia lifted the official cash rate by 25 basis points to 4.60% on September 29, reaching its highest level since November 2011. This marks the fourth rate increase in 2026, bringing total hikes for the year to 100 basis points. The RBA cited elevated inflation, Middle East conflict disruptions, and AI-driven technology costs as justification. For Australian borrowers, the move adds roughly $107 monthly to repayments on a $700,000 variable-rate loan.

Why the RBA raised rates again

The RBA’s Monetary Policy Board voted unanimously to hike rates, citing inflation that remains well above the 2-3% target band. Governor Michele Bullock said recent inflation outcomes were stronger than expected at the previous meeting. The board pointed to the US-Israeli war with Iran, which has disrupted global oil supply and pushed energy prices permanently higher. Some upside risks flagged in August are materialising, including AI-related demand driving rapid growth in global technology prices and domestic capacity pressures forcing firms to raise prices.

The cost to borrowers and savers

According to Canstar analysis, the latest 25-basis-point rise adds roughly $107 to monthly mortgage repayments on a $700,000 loan at an average variable rate. Borrowing power for an average wage earner drops by $11,200. However, savers will benefit: banks including Macquarie announced they will increase variable savings account rates from October 15. Roy Morgan research found nearly 1.8 million Australian mortgage holders, roughly one-third of all borrowers, face financial stress from the cumulative effect of four rate rises this year.

What comes next for rates and the economy

The RBA board retained hawkish language, stating it would raise rates further “if needed”. ANZ economists expect a fifth hike as soon as November 2026. Bullock acknowledged the economy is slowing but warned that if households assume inflation at 3-4% is acceptable, the RBA may need to engineer a sharp economic slowdown to reset expectations. She said the central bank does not expect a recession but may be forced to create one if inflation expectations become unanchored. The next RBA decision is scheduled for November 3.

Uncharted territory for millions

For many Australian borrowers, a 4.60% cash rate represents uncharted territory. Housing prices have fallen in most capital cities, and new housing loans have declined noticeably. Treasurer Jim Chalmers defended the government’s economic record, noting that the budget deficit came in $6 billion lower than forecast and debt fell $10.6 billion, though he acknowledged higher borrowing costs globally are adding pressure. The Australian Council of Social Service warned that further rate rises risk creating unemployment “by design” and could trigger a “human disaster” for vulnerable households.

Final Thoughts

The RBA’s fourth rate hike of 2026 reflects a central bank determined to fight inflation despite mounting household stress. With rates at a 15-year high and another potential rise in November, Australian borrowers face a genuinely tough period ahead. Savers will see modest gains, but the broader economy faces significant headwinds.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.