RBA Tipped to Raise Rates to 15-Year High by End of September

Australia’s Reserve Bank is heading toward a fourth interest rate rise this year as inflation refuses to budge. Macquarie Bank and the big four banks now forecast the RBA will lift the cash rate to 4.6 percent by September 28-29, its highest level since 2011. That move would add $121 monthly to repayments on an average new mortgage of $731,000. RBA deputy governor Andrew Hauser acknowledged on Tuesday that people are furious about inflation, which has stayed above the bank’s 2.5 percent target for five years.

Why the RBA is running out of patience

Inflation slowed only marginally to 3.5 percent in July, well above the RBA’s 2 to 3 percent target. The latest shock is the collapse of the US-Iran ceasefire, which has pushed global oil above $US100 a barrel for the first time since July. Unleaded petrol is tracking toward $2.10 a litre and diesel has passed $2.50. Meanwhile, a sudden explosion in datacentre investment is heaping pressure on construction, which already struggles to find materials and labour for homes, roads and rails.

What Macquarie Bank is forecasting

Macquarie chief economist Ric Deverell said the RBA will raise the cash rate by 25 basis points at its September 28-29 meeting, lifting it from 4.35 percent to 4.6 percent. That would exceed the 4.5 percent rate reached in November 2011. Deverell cited unemployment still sitting three-quarters of a percentage point below pre-COVID levels, suggesting output remains above the economy’s potential and more tightening is needed.

The RBA’s failed experiment and bond market pain

The RBA tried a different path during COVID, raising rates less than other central banks to protect jobs. In early 2025 it looked like it worked, but inflation and growth rebounded in the second half, forcing a reversal. Australia’s 10-year government bond yield has surged to 5.20 percent, its highest since 2011, as investors demand greater compensation for inflation. Bond yields are a crucial benchmark for borrowing costs across the economy, influencing home loans, corporate debt, superannuation returns and savings accounts. Financial markets are pricing in more than a 70 percent chance of a rate hike in September and close to two total hikes by mid-2027.

What this means for households

A 25 basis point rise would add $121 monthly to repayments on an average new mortgage of $731,000. Westpac, Commonwealth Bank, ANZ and NAB also expect the RBA to move higher on rates before Christmas. RBA deputy governor Andrew Hauser said on Tuesday the board may well have to raise rates to tackle inflation, though he stopped short of confirming another hike. The cost-of-living crisis has generated intense community grievance, with households complaining and feeling depressed even as spending continues to tick along.

Final Thoughts

With inflation stuck at 3.5 percent and bond yields at 15-year highs, the RBA appears set to raise rates again by late September. For borrowers, each hike adds real cost to mortgages and debt. The question now is whether more pain will finally bend inflation back to target.

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