Persistent high inflation is set to push the RBA to hike Australia’s cash rate to the highest level since the 2008 Global Financial Crisis (GFC) next week.
Headline inflation rose to 4.3% in the year to September, up from 4.0% in August, while trimmed mean inflation – the RBA’s preferred measure of underlying inflation – rose to an annual rate 3.6%, according to CPI data released today from the ABS.
This means underlying inflation has sat above the RBA’s 2–3% target band for 14 consecutive months.
Annual change to inflation | ||
|---|---|---|
Monthly | Annual rate | Previous month |
Headline | 4.3% | 4.0% |
Trimmed mean | 3.6% | 3.5% |
Source: ABS.
Australia has been battling high inflation for more than four and half years now, and recent communication from the RBA has indicated the Board will press ahead with further hikes if inflation pressures continue.
RBA Deputy Governor Andrew Hauser last week said the central bank was in a “world of hard choices”, while Assistant Governor and Chief Economist Sarah Hunter, when asked if the Board had done enough to tackle inflation said, “Unfortunately, not quite yet.”
All four big banks now expect a November hike
Both CBA and NAB have this afternoon updated their cash rate forecasts, and now expect the RBA to lift the cash rate by 0.25 percentage points to 4.85% at its 2–3 November meeting.
The last time the cash rate was above this level was 18 years ago in November 2008.
Westpac and ANZ were already forecasting a 0.25 percentage point hike at the next Board meeting.
Big banks’ cash rate forecasts for next RBA meeting | |
|---|---|
November | |
CBA | +0.25 Nov |
Westpac | +0.25 Nov |
NAB | +0.25 Nov |
ANZ | +0.25 Nov |
Source: Prepared by Canstar.
What another rate hike will cost borrowers
If the RBA lifts the cash rate by another 0.25 percentage points in November and lenders pass on the increase in full, our analysis shows a borrower with a $600,000 debt and 25 years remaining at the start of the year could face an additional $92 a month in minimum repayments.
That would take the cumulative increase across five hikes since February to $456 a month for a borrower who started with a $600,000 loan.
Impact of 0.25 cash rate hike in | ||
|---|---|---|
Loan size at start of hikes | Hike in Nov | Cumulative increase across 5 hikes |
$500,000 | +$77 | +$380 |
$600,000 | +$92 | +$456 |
$700,000 | $107 | +$532 |
$800,000 | +$123 | +$607 |
$900,000 | +$138 | +$683 |
$1 million | +$153 | +$759 |
Source: Canstar. Based on an owner-occupier paying principal & interest with 25 years remaining in Feb 2026 at the RBA avg variable rate. Assumes rate hike in Nov and banks pass it on the month after. Changes are to minimum repayments.
Another bitter pill for borrowers to swallow
Canstar’s Data Insights Director, Sally Tindall, says, “Today’s inflation figures leave the Reserve Bank with very little room to hold.”
“Both headline inflation and trimmed mean have gone up, not down.
“While central banks across the world are grappling with renewed price pressures, the uncomfortable reality is that here in Australia, we never finished the job the first time around.
“Rate hikes are always a bitter pill for borrowers to swallow. Now these households look set to be pushed to up the prescription for a fifth time this year.
“A 0.25 increase will add roughly $92 a month to an average $600,000 debt with 25 years remaining, pushing the total increase to repayments this year to $456. That’s close to half a grand extra a typical borrower will have to pay compared to just 12 months before.
“That’s going to translate into a very different Christmas for many households than the one they had even just last year.
“Borrowers feeling ripped off by the relentless rate hikes are right to question the RBA’s toolkit, but don’t expect a change any time soon.
“The central bank continues to rely on a single, blunt instrument – one that heavily penalises mortgage holders and cascades down to renters, while actively rewarding cashed-up savers.
“The ‘take with one hand, feed with the other’ strategy needs to be explained.
“For those living mortgage-free and rent-free, another cash rate hike will be like a Melbourne Cup win, because any cash rate hike should translate into more money into their pockets through higher savings rates.
“If the RBA pulls the trigger on another hike for 2026, a saver with $100,000 in a competitively-priced account could potentially pocket over $1,300 in extra interest over the next 12 months off the back of this year’s five rate increases alone.
“That’s not exactly tightening the screws for everyone.”
