The RBA moves again
On 29 September the Reserve Bank's Monetary Policy Board raised the cash rate target by 25 basis points to 4.60%. The Board said the decision was unanimous. It is the fourth increase of 2026, following rises in February, March and May, and it comes after the Board held the rate at 4.35% in August. The RBA's cash rate history shows the target was last above 4.60% in 2011, before it was cut from 4.75% to 4.50% on 2 November 2011.
The Board's statement said inflation remains high and that some of the upside risks it flagged in August are materialising, including higher global energy prices. It also said housing prices have fallen in most capital cities and that new housing loans have declined noticeably. The Board said it will do what it judges necessary to return inflation sustainably to target.
Inflation and the wider economy
The Australian Bureau of Statistics (ABS) reported annual CPI inflation of 3.5% in the 12 months to July, down from 3.8% in June, with trimmed mean inflation steady at 3.6%. The ABS is scheduled to publish the August monthly CPI on 30 September 2026 at 11:30am AEST.
For anyone following new-home costs, the "new dwellings" component rose 5.7% in the 12 months to July. The ABS said project home builders lifted base prices to pass on higher labour and materials costs. Rental prices rose 3.6% in the 12 months to July.
The economy is still growing, but slowly. GDP rose 0.4% in the June quarter and 2.1% over the year to June. Household consumption rose 0.4% in the quarter.
The labour market is loosening. The unemployment rate rose to 4.6% in August from 4.5% in July, even though employment increased by about 39,500 people and the participation rate rose to 67.1%.
Confidence is weak
The Westpac-Melbourne Institute Consumer Sentiment Index fell 5.2% in September to 84.4, from 88.9 in August. A reading below 100 means pessimists outnumber optimists. Westpac pointed to petrol prices back above $2 a litre and to fears of further rate rises, and noted that the housing downturn is starting to weigh on homeowners.
Business sentiment is soft too. NAB said its August survey showed business conditions falling 5 points to -1, turning negative for the first time in six years, while business confidence fell 2 points to -8. Conditions fell in six of the eight industries surveyed, led by construction, mining and manufacturing.
Housing market
Cotality's Home Value Index showed national values fell 0.9% in August, the fifth consecutive monthly decline, leaving them 3.6% below the March peak.
Sydney led the falls. Values dropped 1.4% in August and sit 7.1% below the February peak, with a median value of $1,222,718. Melbourne fell 1.1%, with a median of $786,718. Cotality estimated sales were 15.5% below a year earlier, while capital city listings are 24% higher than a year earlier.
Rents are still rising, with Cotality's national rental index up 5.7% over twelve months. The national vacancy rate rose to 1.9%, and Sydney's 2.2% is now the highest among the mainland capitals, though still low by historical standards.
On supply, the ABS recorded 17,687 dwelling approvals nationally in July, down 3.6% on June.
What to watch next
The Board meets again on 2 and 3 November and will release its quarterly forecasts with that decision. Cotality's September index will show whether the monthly falls are continuing. Westpac's economists have named a November rise as their base case, which is one bank's forecast rather than a certainty.
General information only, not financial or credit advice.
Sources
- RBA, Statement by the Monetary Policy Board, 29 September 2026: https://www.rba.gov.au/media-releases/2026/mr-26-27.html
- RBA, Statement by the Monetary Policy Board, 11 August 2026: https://www.rba.gov.au/media-releases/2026/mr-26-19.html
- RBA, 2026 Monetary Policy Board meeting dates (2-3 November, outcome at 2.30pm on the second day): https://www.rba.gov.au/media-releases/2025/mr-25-02.html
- RBA, Cash rate target history: https://www.rba.gov.au/statistics/cash-rate/
- ABS, Consumer Price Index, Australia, July 2026 (monthly release, 26 August 2026): https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/jul-2026
- ABS, Consumer Price Index, Australia, August 2026 (release scheduled 30 September 2026, 11:30am AEST): https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/aug-2026
- ABS, Australian National Accounts: National Income, Expenditure and Product, June 2026: https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/jun-2026
- ABS, Labour Force, Australia, August 2026: https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/aug-2026
- ABS, Building Approvals, Australia, July 2026: https://www.abs.gov.au/statistics/industry/building-and-construction/building-approvals-australia/jul-2026
- Westpac IQ, Consumer Sentiment, September 2026: https://www.westpaciq.com.au/economics/2026/09/consumer-sentiment-september-2026
- Westpac IQ, RBA decision, 29 September 2026: https://www.westpaciq.com.au/economics/2026/09/rba-decision-29-September-2026/
- NAB, Business Survey, August 2026: https://www.nab.com.au/news/economy-markets/business-conditions-drop-into-negative-territory-business-survey-august26
- Cotality, Home Value Index, September 2026 edition (August data): https://discover.cotality.com/hubfs/Article-Reports/COTALITY%20HVI%20SEP%202026%20FINAL%20(1).pdf