The Reserve Bank of Australia has lifted the cash rate target to 4.60 per cent, its highest level since 2011, after the Monetary Policy Board voted unanimously at its September meeting to raise rates for the fourth time this year.
The 25 basis point increase was announced on Tuesday and takes effect on Wednesday 30 September, under the Bank’s practice that changes apply the following day. It is the Board’s first change to the cash rate since May: three increases between February and May took the rate from 3.60 per cent to 4.35 per cent, and the Board then held in June and August while it waited on the data. This year’s tightening now amounts to 100 basis points, more than reversing the three 25 basis point cuts of 2025. The cash rate was last this high in October 2011, when it stood at 4.75 per cent.
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What the Board Said
In its statement, the Board said recent inflation outcomes in Australia “were stronger than expected at the previous meeting”. It said some of the upside risks to inflation it had flagged in August “are materialising”, and that a further tightening in financial conditions was warranted to return inflation to target.
The Board left the door open to another increase. It said the Bank “will continue to do what it considers necessary” to bring inflation back to target, “including increasing the cash rate target further if needed”.
The Reasons the Board Gave
The Board attributed the move to a mix of global and domestic pressures. It said the conflict in the Middle East has broadened, and that global energy prices are much higher than the Bank assumed in its August forecasts. AI-related demand has been lifting the prices of global technology goods. Domestically, the Board pointed to capacity pressures, with firms reporting cost increases and some raising or planning to raise their prices. It also cited higher fuel costs that have partly flowed through to other goods and services, and short-term inflation expectations that remain elevated.
The Reaction
Speaking after the decision, Governor Michele Bullock said the increase was “tough” for mortgage holders. She said high inflation hurts all Australians, especially the most vulnerable. Asked about recession, she said a downturn was not the Bank’s central case “at this point”.
Treasurer Jim Chalmers said the decision was widely expected, but “that doesn’t make it any easier”. He said Australian workers “didn’t choose this war” and are “paying a hefty price for it”. The Coalition has blamed government spending for the pressure on prices.
The increase lands on a wider economy already under pressure. Earlier this month, S&P downgraded Queensland’s credit rating, warning about debt and the Olympics bill.
Canstar, as reported by The Guardian Australia, estimates the increase will add about $120 a month to repayments on an average $730,000 mortgage. Once all four of this year’s increases are counted, the extra cost reaches roughly $480 a month.
The Markets and the Next Meeting
The Australian dollar moved only slightly after the decision. Market pricing gives another increase in November about a 42 per cent chance, and about a 75 per cent chance by February 2027. The Board’s next scheduled decision is due on 3 November.
No Promise This Is the Last
The Board has kept further increases on the table, and market pricing gives another move in November a meaningful chance. No relief was offered, and nothing in the guidance promises that this is the last increase.
Sources: Reserve Bank of Australia, “Statement by the Monetary Policy Board: Monetary Policy Decision”, 29 September 2026; The Guardian Australia, “Reserve Bank hikes cash rate to 4.6%, the highest level since 2011”, 29 September 2026; ABC News, coverage of the September decision; Nine’s Brisbane Times, “RBA hikes interest rates to 4.6 per cent in 15-year high”
Photo: Nick-D, CC BY-SA 4.0, via Wikimedia Commons.
The Reserve Bank of Australia’s head office in Martin Place, Sydney, photographed in April 2025. The Board raised the cash rate to 4.60 per cent on 29 September 2026; this photograph is not from the meeting.
