Interest rates: a second hold
The Reserve Bank board left the cash rate target at 4.35% on 11 August, the second meeting in a row without a change (there was no July meeting). The statement describes the decision as unanimous. The rate rose three times in 2026, at the February, March and May meetings, from 3.60% at the end of 2025.
The board described the economy as slowing as expected, but said inflation is still too high. It does not expect inflation to return to around the middle of its 2 to 3% target range until late 2027, and it sees upside risks to that outlook. It also said it would raise the rate further if those risks materialise. The statement noted that housing prices are falling in some capital cities and that new housing loans have declined noticeably.
Inflation and jobs
The ABS Consumer Price Index, Australia, for July 2026, released on 26 August, showed annual inflation of 3.5%, down from 3.8% in June. Annual trimmed mean inflation, reported in the same release, was 3.6%, unchanged from June. In the month itself, prices rose 1.0% in original terms and 0.6% seasonally adjusted. Housing was again the largest contributor to annual inflation, up 5.0%.
The ABS labour force survey for July, released on 20 August, put the seasonally adjusted unemployment rate at 4.5%, up from 4.4% in June. Seasonally adjusted employment fell by 15,800 people (0.1%), and monthly hours worked fell 0.6% in seasonally adjusted terms. The ABS noted that July's sample had seven rotation groups instead of the usual eight, so estimates carry larger standard errors, and recommended caution with short-term changes. Trend employment, which smooths out month-to-month swings, still rose by 29,300 people.
The most recent GDP figure remains the March quarter: seasonally adjusted chain volume growth of 0.3% in the quarter and 2.5% over the year.
Sentiment: consumers up, businesses flat
The Westpac-Melbourne Institute consumer sentiment index rose 6% in August to 88.9, from 83.9 in July (released 18 August). Westpac said the gain came from people with mortgages and showed up only in responses collected after the RBA's 11 August decision to hold. It still described the result as pessimistic and below last year's levels.
NAB's business survey for July, also released on 11 August, showed business confidence slipping 1 point (unrounded) to -6 after three monthly rises. Business conditions rose 1 point to +4, still below the long-run average of +7. NAB noted that labour cost growth, at 2.2% on a quarterly basis, was the highest since January 2025.
Home values: the decline widens
Cotality's national Home Value Index fell 0.7% in July (released 3 August). Cotality said this was the largest single-month decline since December 2022. Sydney fell 1.4% and Melbourne 1.2%. Brisbane (down 0.6%) and Adelaide (down 0.2%) also declined, the second month in a row for both on revised figures.
Cotality puts the Sydney median dwelling value at $1,244,617, down 4.0% over three months and 2.0% over twelve. The Melbourne median is $797,354, down 3.4% over three months and 2.8% over twelve. Nationally, annual growth was still positive at 5.3%.
The fall is concentrated at the top. Across the country, upper-quartile home values fell 3.2% over the three months to July, while the lower price tier rose 0.3%. Cotality also reported that new listings were slowing, led by Sydney, as owners wait for better conditions, while total advertised supply across the capitals was 5.7% above its five-year average. Cotality's head of research said capital city auction clearance rates have remained below 50% since late May. The combined regional index fell 0.2%, its first decline since January 2023.
A forecast, not an outcome
NAB Economics published a note in August expecting national dwelling prices to fall about 7% from peak to trough, with falls of about 10% in Sydney and Melbourne and 2 to 4% across the mid-sized capitals. That is one bank's view, not an outcome. The Cotality index itself is a broad measure of dwelling values that does not describe the price of any particular new project.
The next scheduled releases are Cotality's August Home Value Index in early September and the next RBA decision on 29 September.
General information only, not financial or credit advice.
Sources
- RBA, Statement by the Monetary Policy Board, 11 August 2026: https://www.rba.gov.au/media-releases/2026/mr-26-19.html
- RBA, Cash Rate Target history: https://www.rba.gov.au/statistics/cash-rate/
- ABS, Consumer Price Index, Australia, July 2026: https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/jul-2026
- ABS, Labour Force, Australia, July 2026: https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/jul-2026
- ABS, Australian National Accounts, March 2026: https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/mar-2026
- Cotality, Australia's housing market downturn widens (3 August 2026): https://www.cotality.com/au/insights/articles/australias-housing-market-downturn-widens
- Cotality, Home Value Index report, results as at 31 July 2026: https://discover.cotality.com/hubfs/Article-Reports/COTALITY%20HVI%20AUG%2026.pdf
- Westpac IQ, Consumer Sentiment, August 2026: https://www.westpaciq.com.au/economics/2026/08/consumer-sentiment-august-2026/
- NAB, Business Survey, July 2026: https://www.nab.com.au/news/economy-markets/nab-business-survey-july-2026
- NAB Economics, The implications of a housing slowdown (August 2026): https://www.nab.com.au/content/dam/nab-email-composer/nabmarketsresearch/economics/pdf/2026-08%20housing%20channels.pdf