Making Sense of RBA Actions in 2026 With Wayne Blazejczyk

If you're a borrower, 2026 has not been your year.

The Reserve Bank of Australia, our central bank, is responsible for controlling inflation, with the aim of keeping inflation to 2-3% each year. This number is low enough that inflation does not significantly influence society's economic decisions. Inflation that is too low (deflation) can lead to businesses reducing wages or laying off workers, whereas inflation that is too high results in the value of the dollar reducing so people can't afford as many goods and services. The way the RBA controls inflation is through control of the cash rate.

At the beginning of 2026, inflation was already picking up as Australians were spending strongly and borrowing more. Since January, the RBA has hiked cash interest rates not once or twice, but four times, and has warned they may increase again if they deem necessary.

February: the first

On 3 February the RBA raised rates for the first time since 2023, taking the cash rate to 3.85%. Demand was outpacing what the economy could supply, and prices were rising as a result.

March: the second

The second hike came on 17 March, lifting the rate to 4.10%. By then, the issue was not just rising inflation. Conflict in the Middle East was pushing up oil prices, and in the RBA's minutes, they stated that if oil held near US$100 a barrel, headline inflation could climb to around 5% in the June quarter.

May: the third

Inflation rose to 4.6% in March, well above the target 2-3%. As a result, the RBA issued a third hike up to 4.35%. This time eight board members voted to hike and only one wanted to hold. Each increase was winning more support than the last, a sign the board's concern about inflation was deepening.

June and August: pause

The RBA then held in June and again in August. In August the Board said the economy appeared to be slowing as expected, however it also noted that higher fuel prices were being passed through to other goods and services, so inflation was likely to stay high for some time.

September: the fourth

In a unanimous decision, the Board voted to raise the cash rate for the fourth time to 4.6%. The RBA's statement said inflation was still too high and that further tightening in financial conditions was warranted to bring it back to target in a reasonable period.

With three months left in the year, we hope inflation will reduce back to a manageable level to avoid any further pressure on borrowers, as interest rates are currently sitting at a 15 year high. However, it is unfortunately a possibility that rates could increase again, with ANZ Bank predicting another rate rise when the RBA meets again in November.

This post is general information, not financial advice. If your repayments are becoming difficult, talk to your lender early, consider shopping around lenders or consulting with a mortgage broker.