RBA rate hike: Australia lifts cash rate to 4.85% in split 6-3 vote

The Reserve Bank of Australia (RBA) raised its official cash rate by 25 basis points to 4.85 per cent on Tuesday, 3 November 2026, at the end of its board meeting held on Melbourne Cup day. It was the bank's fifth increase of the year, after moves in February, March, May and September, and it takes the rate to its highest level since 2008. The decision was not unanimous: six members of the monetary policy board voted for the rise, while three wanted to keep the rate at 4.60 per cent. The bank pointed to inflation that remains too high, the conflict in the Middle East and the jump in oil prices that has followed it.

Australia is now one of the few large advanced economies still raising interest rates in late 2026. Many central banks paused or cut in the past two years, but the RBA has been dealing with inflation that refuses to fall back into its target band. The trimmed mean measure strips out the most extreme price moves each quarter to show the underlying trend, and at 3.6 per cent it is well above the level the bank wants. When underlying inflation is rising rather than falling, a central bank that has promised to bring it down has little choice but to tighten again.

The split vote is the most telling part of the decision. A 6-3 outcome shows that a third of the board believed the hikes already made this year should be given more time to work. Governor Michele Bullock acknowledged that another rise would be unwelcome for households but argued that it was needed to bring inflation down. Reports of her press conference said she signalled a wait-and-see approach from here, noting that the tightening done earlier in the year has not yet fully passed through to the economy. That language suggests the bank is not committing to a sixth hike in December.

Oil is the outside factor. The war involving Iran and disruption around the Strait of Hormuz have pushed fuel costs up worldwide and that feeds through to petrol prices and freight costs. Reports of the press conference also said the governor placed more weight on domestic price pressure than on the war itself, which means the bank sees inflation as broad-based rather than a one-off fuel shock.

The cost falls hardest on borrowers. For borrowers on variable rates, a cash rate move reaches monthly repayments within weeks. Macquarie was among the first lenders to announce that it would raise its variable home loan reference rates by 0.25 per cent, effective 19 November. The RBA also expects unemployment to rise further than it previously forecast, although it still expects jobs to keep growing. Some bank economists expect unemployment to climb above 5 per cent.

Peepals calculation: Five rises of 0.25 point each this year add up to 1.25 points (5 × 0.25), so the cash rate began 2026 at 3.60 per cent (4.85 − 1.25) and is now about a third higher (4.85 ÷ 3.60 ≈ 1.35). Using the published figure of roughly A$92 a month for every 0.25 point on a A$600,000 variable loan, the five moves together add roughly A$460 a month (5 × 92) to that borrower's repayment. Our calculation from the reported figures.

Short-term: Variable-rate borrowers will see higher repayments from late November as lenders pass on the rise. Savers may get slightly better deposit rates. A higher rate tends to support the Australian dollar against other currencies.

Long-term: If inflation eases over the coming months, the split vote and the governor's comments point to a pause rather than further increases. If underlying inflation keeps rising, the board may feel forced to act again despite a weakening job market, and economists are divided on which path is more likely.

Who is affected: Australian home owners with variable loans, renters whose landlords pass on higher costs, small businesses that borrow, and the many Indian students and skilled migrants living in Australia who pay rent or service loans there. Indian families sending money to children studying in Australia may also notice the exchange rate move.

What to watch next: The RBA's final decision of 2026 on Tuesday, 8 December, and how quickly the major banks pass on today's increase.

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