The Reserve Bank of Australia is set to announce its next cash rate decision at 2:30pm on Tuesday, with all four of Australia's major banks and financial markets now aligned on one outcome: another rate rise. If confirmed, it would push the official cash rate from 4.35 per cent to 4.6 per cent — the highest level since 2011 — and leave the average borrower hundreds of dollars worse off each year.
Why another RBA rate rise looks certain
Financial markets have priced in an 80 to 90 per cent probability of a 0.25 percentage point increase, and for the first time in this tightening cycle, all four major banks — Commonwealth Bank (CBA), Westpac, National Australia Bank (NAB) and ANZ — are forecasting the same outcome.
The RBA is understood to believe inflation risks are materialising faster and at higher levels than previously anticipated. Headline inflation currently sits at 3.5 per cent, while the trimmed mean — which strips out the largest price swings to give a clearer picture of underlying inflation — stands at 3.6 per cent, well above the RBA's target band of 2 to 3 per cent.
Fuel costs, housing construction expenses and dining out are identified by Australian Bureau of Statistics data as the primary drivers of that elevated inflation. The ongoing conflict in the Middle East has further pushed Brent crude oil prices to their highest point in months, adding to global cost pressures. Meanwhile, domestic demand, economic growth and employment have all proven more resilient than forecast, while productivity growth remains sluggish.
A money expert at comparison platform Finder noted that Australia is effectively at the mercy of "global inflationary pressures" but that the RBA "has a mandate to keep inflation down" and that rate rises remain its primary instrument for doing so.
What the big four banks are forecasting
ANZ economists have flagged that the RBA no longer regards recent energy price spikes as temporary, instead treating them as a sustained inflationary risk — and ANZ has already predicted a follow-up rate rise in November. Westpac and CBA both pulled forward their November hike forecasts to this month, though both believe 4.6 per cent is likely to be the peak for this cycle.
CBA has indicated that if Tuesday's quarterly trimmed mean inflation figure comes in at 1 per cent or more, a second consecutive November increase becomes probable. NAB considers a single 0.25 per cent rise the most likely outcome, while acknowledging that labour market data could change the picture.
How much more will borrowers pay?
If lenders pass on the full increase — as has been the pattern — the impact on household budgets will be significant. The average Australian home loan currently stands at $731,000, ranging from $516,000 in Tasmania to $842,000 in New South Wales, based on ABS and Canstar figures.
With variable rates for owner-occupiers sitting between 6.24 and 6.62 per cent, the typical borrower is already spending between $4,500 and $4,680 a month on their mortgage. A 0.25 per cent increase would add:
- $120 per month ($1,440 per year) for the average Australian borrower
- $138 per month ($1,656 per year) for the average NSW borrower
- $100 per month ($1,200 per year) for the average first home buyer, who holds a loan of around $610,000
Beyond repayments, a rate rise of this size also reduces borrowing capacity for prospective buyers by roughly 2 to 2.5 per cent, tightening conditions further for those trying to enter the market.
For Australians already managing the pressure of higher living costs, the cumulative effect of repeated rate increases is considerable. Those exploring their long-term housing options may also want to weigh broader financial decisions carefully — including how seemingly lower-cost housing arrangements can carry hidden long-term expenses.
The RBA's decision and accompanying statement are expected at 2:30pm Tuesday, with the central bank's commentary on the inflation outlook and future rate path set to be closely scrutinised by economists and borrowers alike.
