The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.60% at its September 2026 meeting, a unanimous decision that matched market expectations. This move marks the fourth increase this year and lifts borrowing costs to their highest level since 2011.
Policymakers highlighted several forces adding to inflationary pressures: higher global energy prices following oil supply disruptions linked to the broader Middle East conflict, stronger-than-expected recent inflation readings, and persistent domestic capacity constraints. In addition, AI-driven demand is pushing up global technology goods prices, and firms are reporting rising input costs along with intentions to pass these on to consumers.
While output growth has slowed, it was slightly stronger than anticipated in the second quarter, even as consumer spending shows signs of softening. Housing prices have declined in most capital cities, new housing loan approvals have fallen, and labour market conditions have also eased.
The Board reiterated that further policy tightening may be required to prevent inflation from becoming entrenched and to return it to target on a sustainable basis.
