Higher energy costs have pushed Australia’s central bank to tighten again. Despite signs of an economic slowdown, the decision keeps pressure on borrowing costs.
The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.60% on September 29, taking it to its highest level in roughly 15 years. The unanimous decision came despite signs of an economic slowdown, with the bank judging that persistent inflation warranted further tightening.
The RBA’s decision statement offered no assurance that this would be the final increase. Describing the steps it could take to restore price stability, the Board explicitly included:
“including increasing the cash rate target further if needed”
RBA Monetary Policy Board, excerpt from its September 29 statement
Oil and technology costs drive the decision
Some of the inflation risks identified in August are now materialising, according to the Board. Oil supply disruptions are keeping energy prices elevated, with part of the rise in fuel costs spreading into other goods and services. Demand for technology products linked to AI investment is another source of global price pressure cited by the bank.
At home, businesses are passing on higher costs while capacity constraints remain. Firms consulted by the RBA said they were raising prices or considering doing so. The bank’s concern is that the pressure could become entrenched rather than prove temporary.
Yet consumer spending growth is easing, housing prices have fallen in most capital cities and new housing loans have declined noticeably. The increase did not come against a backdrop of uniformly strong growth. The Board acknowledged the slowdown while stressing that inflation remained too high.
Four increases add up to 100 basis points
The RBA’s rate history, reviewed by KriptoMeta, shows that the new 4.60% target takes effect on September 30. Following increases in February, March and May, the fourth rise brings this year’s total to one percentage point, or 100 basis points.
| Effective date in 2026 | New target rate | Increase |
|---|---|---|
| February 4 | 3.85% | 25 basis points |
| March 18 | 4.10% | 25 basis points |
| May 6 | 4.35% | 25 basis points |
| September 30 | 4.60% | 25 basis points |
The bank had held rates steady at its June and August meetings. September’s decision ends that pause, but neither the timing nor the size of another increase has been announced. Future decisions remain tied to incoming data. When following rate announcements, separating decisions, expectations and effective dates in the economic calendar helps distinguish an approved change from a possible next step.
Lenders will determine the mortgage impact
Macquarie provided one of the first concrete responses. In its September 29 announcement, the bank said it would raise variable home loan reference rates by 0.25 percentage points from October 15. Ongoing variable rates on transaction and savings accounts will also rise that day, with deposit increases differing by account type and balance tier.
4.60% is not the mortgage rate. The RBA targets the rate on overnight borrowing between banks. A customer’s loan rate and repayment depend on the lender’s changes and contract terms; the decision does not produce one extra-payment figure for every loan.
The next developments to watch are how lenders pass through higher costs and whether fresh price data reinforce the RBA’s concerns. Both will remain part of the economic news agenda.
The bank’s webcast page carries the official September 29 media conference recording for readers who want to watch the briefing that followed the decision.
