Australia Hikes Rates to 4.85%: Fifth Rise of 2026 Hits an 18-Year High

Australia's central bank raised its cash rate by 25 basis points to 4.85% on Tuesday, November 3 — its fifth hike of 2026 and the highest level in 18 years. The Reserve Bank of Australia (RBA) board voted 6-3 for the move, with three members preferring to hold at 4.60%, as inflation stayed well above target.

What did the RBA decide?

The RBA lifted the cash rate target to 4.85%, up from 4.60%. It is the fifth increase this year — after hikes in February, March, May and September — taking total tightening in 2026 to 125 basis points. You have to go back to 2008, just before the global financial crisis, to find Australian rates this high.

The decision was widely expected. Thirty of 32 economists polled by Reuters expected a hike, and markets had implied an 88% chance of a move after hot third-quarter inflation data.

Why did the RBA hike again?

Inflation is still too high, and it is now expected to stay high for longer. Underlying inflation accelerated to 3.7% in the third quarter, a two-year high, after more than five years above the RBA's 2% to 3% target band. The bank said inflation remains elevated and broadly based, partly reflecting higher fuel and commodity prices linked to the conflict in the Middle East, and partly tighter domestic capacity — including rapid AI-related investment pushing up prices for technology goods.

In its updated forecasts, the RBA no longer expects inflation to reach even the top of its target band until late 2027 — about three quarters later than it forecast before. "Given the revised inflation outlook and the continuing upside risks, the Board judged that a further tightening in financial conditions is warranted," the board said, adding it "will continue to do what it considers necessary to bring inflation sustainably back to target."

Why is it blowing up?

The split vote is the story traders seized on. A 6-3 decision is unusually close, and the RBA removed a reference to increasing the cash rate further if needed. Markets read that less-hawkish wording as a sign the tightening campaign may be near its end, even as the rate itself hit an 18-year high.

The Australian dollar slipped 0.3% to $0.6979 after the decision, and three-year government bond futures fell. In shares, the S&P/ASX 200 was up just 0.18% on the day, after briefly dipping into negative territory when the decision became public — a muted reaction that showed how much of the hike was already priced in.

The move also puts Australia at the hawkish end of developed-market central banks: its 125 basis points of tightening this year has more than reversed the 75 basis points of easing in 2025, while the U.S. Federal Reserve stayed on hold this month.

What does it mean for households and markets?

For borrowers, lenders are largely expected to pass the hike on, adding to repayments on variable home loans. The pressure is already visible: housing is on track for its biggest downturn in four decades, and unemployment has risen to a five-year high of 4.7%, even as the RBA still judges the labour market a little tight. That is the trade-off behind the split vote — inflation is sticky just as growth momentum slows.

For savers and cash investors, the flip side is higher returns on deposits, with some term deposits already above 5.5%. For share investors, higher rates keep pressure on valuations, particularly for rate-sensitive sectors, while banks and cash-like assets benefit from wider margins and higher yields. This is a report of what happened and how markets reacted — not a recommendation to buy, sell or hold anything.

What's next?

The RBA's final decision of the year is on Tuesday, December 8. After Tuesday's split vote and softer wording, markets strengthened bets that the bank will leave rates unchanged next month and assess how this year's tightening flows through the economy. The next inflation readings will decide whether 4.85% is the peak — or just the latest step.

Sources

Reuters — Australia's central bank lifts rates to 18-year high, split vote points to pause ahead
Motley Fool Australia — RBA hikes rates to 4.85%: What's next for ASX shares?
FXStreet — Australian Dollar declines despite RBA rate hike
Mortgage Choice — RBA hikes rates to GFC levels as high inflation bites

FAQ

What is Australia's cash rate now?

The RBA raised the cash rate by 25 basis points to 4.85% on November 3, 2026 — its fifth hike of the year and the highest level since 2008.

Why did the RBA raise rates again?

Underlying inflation rose to 3.7%, well above the 2% to 3% target, and the RBA now expects inflation to stay above the band until late 2027.

Was the RBA vote unanimous?

No. The board split 6-3, with three members preferring to hold rates at 4.60%, which markets read as a sign tightening may be nearing its end.

When is the next RBA decision?

The next and final RBA decision of 2026 is on Tuesday, December 8, and markets currently lean toward a hold.