A few weeks ago the consensus was that Australia had seen the last rate rise of this cycle and cuts would begin in 2027. That consensus has collapsed. Financial markets are now pricing a roughly 95 per cent chance the Reserve Bank lifts the cash rate when it meets on 29 September, and all four major banks now expect a hike before year’s end. Here’s the plain-language guide to what changed and what it costs you.
What Changed
The turn happened quickly. The RBA held the cash rate at 4.35 per cent in August, but Governor Michele Bullock made clear the door remained open to a further increase if inflation did not keep tracking down.
Then the data landed. Annual inflation came in at 3.5 per cent for the twelve months to July, ahead of expectations, while the trimmed mean measure the RBA watches most closely held steady at 3.6 per cent, still above the 2 to 3 per cent target band.
NAB was first to nominate a September move. Westpac, the last holdout, reversed its call on 8 September. Financial markets are now pricing around a 95 per cent chance of a rise this month, with a 37 per cent chance of a follow-up in November. The expected move is 0.25 percentage points, taking the cash rate to 4.60 per cent.
The Signal From the RBA Itself
The strongest indication came from the Bank’s own senior officials this month. Speaking to a parliamentary committee on 18 September, Bullock said she had “retired” the “narrow path” framing her predecessor coined, the careful balancing of bringing inflation down without causing job losses. The shift in language points to a more hawkish stance.
Deputy Governor Andrew Hauser went further, signalling that if current upside risks persist, rates may need to go higher than previously anticipated. Senior officials have also framed current rates as merely back at a “sensible level” rather than restrictive, which is not the language of a central bank about to stop.
What It Costs You
For anyone with a mortgage, the practical question is simple: what does 0.25 per cent actually add?
The amounts look manageable in isolation, but they compound. A household with a $600,000 loan is looking at roughly $1,175 more a year, on top of the three rises already delivered in 2026. For a household already stretched, each increment lands on a budget with less slack than the last.
The Argument Against Hiking
In fairness, there’s a genuine critique of the RBA’s position, and it deserves airing. Several economists argue that the main drivers of current inflation are supply-side, global energy prices tied to the Middle East conflict, and the enormous spending by American tech companies on AI infrastructure and data centres. Those are not problems that raising Australian mortgage repayments can solve.
On that view, hiking risks squeezing households without addressing the actual cause. The counter-argument from the Bank is that failing to act lets inflation expectations become entrenched, which ultimately requires more painful intervention later. Both positions are defensible, which is part of why this decision is being watched so closely.
What to Do Before 29 September
A few practical steps. Model your repayments at 0.25 per cent higher now, while it’s hypothetical, so the actual decision is not a shock. If you’re on a variable rate and stretched, talk to your lender before you’re in difficulty rather than after, options are always better earlier. Compare your loan, since lenders move independently of the RBA and the gap between the best and worst rates is often larger than a single hike.
If you’re buying, stress-test your borrowing at a higher rate rather than today’s, and do not assume relief is coming, the four major banks have all abandoned the cuts-in-2027 view within the space of a month. This is general information, not financial advice.
The Bottom Line
Markets are pricing a 95 per cent chance of a rate rise on 29 September, taking the cash rate to 4.60 per cent, after inflation surprised on the upside and the RBA’s own officials turned markedly more hawkish. On a $600,000 loan that’s about $98 a month, or $1,175 a year, on top of three rises already this year. Model it now, compare your loan, and plan for higher-for-longer rather than hoping for cuts that the banks themselves have stopped forecasting.
Epik Wire covers the property market in plain language for buyers, owners and borrowers. Subscribe to our newsletter to stay informed.
