RBA Cash Rate Reaches 4.85% After Three Board Members Voted to Hold

Macquarie’s help page for its home loan customers splits its own customers by the first three digits of their BSB. Those whose BSB starts with 182 will see the new variable rate in the bank’s app and online banking on 19 November. Those whose BSB starts with 183 will see it the following day. For principal-and-interest borrowers, the first repayment that falls within 30 days after 19 November will not change at all, and the change will apply the following month. For interest-only borrowers, the first repayment after 19 November will change. The cash rate itself took effect on 4 November, the day the Reserve Bank of Australia announced it, and Macquarie was the first lender to say what it would do. The gap between those two dates is where this rate rise actually lives, in the weeks when a decision has been made and a bill has not yet arrived, and the Board that made the decision spent Tuesday arguing about how much of what it has already done has reached anyone at all.

The Board voted six to three to lift the RBA cash rate target by a quarter of a percentage point, to 4.85 per cent. Three members voted to hold at 4.60 per cent. It is the fifth rise this year, after rises in February, March, May and September that took the rate from 3.60 per cent, and Governor Michele Bullock told reporters afterwards that she did not know what the next move would be. “I don’t know what the next move will be,” she said, and the Board had removed the line from its September statement that said it would increase the rate further if needed. Five rises are now in the system, she said, the last couple have not even started to flow through, and it was “probably a good point to just take stock for a minute”. The risks to activity and inflation are centralised in the forecasts, she said, and the Board is preserving its options. The statement itself says inflation will stay above the 2 to 3 per cent target band for the coming year and will not return to the top of the band until late 2027.

The three who voted to hold had a case Bullock was willing to state in full. Housing has reacted to the rises already made, the unemployment rate is drifting up, and there is no sign of wages growth accelerating, she said, and with four rises already done it was worth waiting a bit longer for more data. The dissenters weighted the downside risks more heavily and wanted more information, and they were not ruling out a rise. Whether policy is restrictive enough is “an open question”, Bullock said. The statement gives the hold voters their facts too. The economy is slowing, housing prices have fallen significantly and the unemployment rate has risen, and dwelling investment and household consumption will be weighed down by the higher rate and the falls in housing prices. Asked whether the Board was waiting until it heard the economy crack, as Paul Keating once put it in 1989, Bullock answered: “We don’t see the economy cracking at this point.” The Board is not looking for a recession, she said, but growth has to stay subdued and the labour market has to ease further, and people will feel something recession-like because they feel poorer and their incomes grow slowly.

The rise is not, Bullock insisted, about the oil price. “We are not tightening monetary policy because of the direct impact of oil prices on inflation,” she said, because monetary policy cannot affect global oil prices. The domestic capacity pressures the Board is tightening against were evident before oil prices rose, which is why the rises began in February, before the Middle East conflict started. The danger she kept returning to was expectations. If households and businesses come to expect higher inflation, they build it into the prices they set, and the creep she named was a world where people start thinking “3.5 per cent is the new normal”, and then 4 per cent, and then 4.5 per cent. The Bank’s business liaison contacts and a National Australia Bank survey both show businesses expecting prices to stay elevated. One piece of evidence she offered was the ban on card surcharges: some reported price rises since the ban have been well above the typical surcharge of about 1 per cent, which she read as excess demand showing up in prices, not the surcharge itself. The same excess demand is being fed by investment in data centres and artificial intelligence, about 70 per cent of it imported, which adds to demand now while the productivity it promises is yet to come, and which pushes up the neutral rate, the rate at which policy neither stimulates nor restrains. The Bank judges the neutral rate’s companion measure, the unemployment rate consistent with stable inflation, has drifted a little higher than the 4.5 per cent it previously assumed. Bullock would not give an exact number for it.

The Board has been here before, a year ago, moving the other way. It cut the cash rate in February, May and August 2025, to 3.60 per cent, when inflation had come back into the target band briefly and consumption was declining, and when fears about tariffs and trade were at their height. Those fears faded, consumption and real incomes rebounded faster than the Bank expected, and the cuts are now being reversed one rise at a time. Bullock would not call the cuts a mistake. “If we had the crystal ball and we knew what was going to happen, maybe we would’ve been a bit more cautious,” she said. The full effect of a rate change takes 12 months or so, sometimes a bit longer, to work through, and the channel she described runs through housing turnover and the wealth effect on consumption, and through the exchange rate into import prices over nine to 12 months. Even the downside scenario the Board tested barely brings inflation down faster, because the next year is largely baked in: the indirect effects of oil and the excess demand already in the system leave trimmed mean inflation around 3.5 per cent until the end of 2027.

New home-loan commitments for investors are falling substantially further than they did in previous hiking cycles, Bullock said, which suggests something else is going on alongside the rate rises, and she pointed to the tax changes without being able to say how much of the fall they explain. The government’s package abolishes negative gearing and pares back capital-gains-tax discounts, Chalmers said the previous week, taking responsibility for the difficult parts of it. Home-loan commitments overall are 27 per cent below their November 2025 peak, according to figures reported by AAP, with owner-occupier lending dipping only modestly. Bullock said she could not give a firm breakdown of how much of the investor fall the tax changes explained.

The argument about who is responsible for the excess demand ran in parallel, in Antigua and Barbuda, where Prime Minister Anthony Albanese is attending the Commonwealth Heads of Government Meeting. Albanese blamed the Coalition for opposing savings measures, and Chalmers said the government “takes full responsibility” for its part, pointing to almost $180 billion in savings since it came to government and saying the budgets were not what was putting upward pressure on inflation. Shadow Treasurer Tim Wilson called the government “addicted to spending”. The central bank’s own assessment, reported by AAP, is that government spending moderated in the 12 months to November as cost-of-living measures phased out and spending on defence, disability and aged care eased, though public demand still has to be taken as given when the Board sets rates. “Independence is a two-way street,” Bullock said of fiscal policy. Household spending rose 0.6 per cent in September and discretionary spending was up 6.9 per cent over the year, the Bureau of Statistics figures reported by AAP show. The Bank’s updated forecasts have real wages retreating 1 per cent over 2026.

The lenders, meanwhile, have set their own dates. Teachers Mutual Bank and its four sister brands will add a quarter of a percentage point from 12 November. Westpac, NAB and the Commonwealth Bank confirmed the same increase from 13 November, according to AAP’s Wednesday update, and Macquarie’s 19 November date makes it the last of the lenders to move so far. Canstar’s modelling, which assumes an owner-occupier principal-and-interest loan with 25 years remaining and each rise passed on in full the following month, puts the November rise alone at $92 a month on a $600,000 loan and $107 on $700,000, and the five rises together at $456 and $532 a month. The average new owner-occupier loan is about $731,000, against about $254,000 in November 2008. The savings side moves too: Macquarie’s ongoing savings rate rises to 5.5 per cent on balances up to $250,000 and its transaction account rate to 3.25 per cent from 19 November, and Westpac’s Spend&Save maximum ongoing rate rises to 6.20 per cent for customers aged 18 to 40 who meet monthly conditions. Between 12 and 15 per cent of the big four banks’ mortgage customers have no repayment buffer at all, Canstar’s figures from the banks’ latest results show.

Avelima Satiu, a Sydney mother profiled by Guardian Australia, described the interval in the language of shifts. “We have to review our budget; we usually look at how many extra shifts we can pick up,” she said, and her husband “works every weekend, he works seven days a week and his hours are long”. A commenter writing as shibztagram on ABC News’s Instagram post described being a single person eight months into a home with a $2,222 monthly mortgage, and terrified of the rises. “I am terrified of interest rate rises… I now have to consider getting a second job in order to keep my home. There is nothing else I can give up.” A small-business owner writing as mazzz2___ on the same post said business-loan repayments had gone up $40,000 a year, that eight staff contracts had not been renewed, and that one employee was left and the business was closing. “My business loan repayments have gone up $40k a year. I now have 1 employee left then I’m closing the business.” Bullock herself noted that multiple job holders are rising, as people under cost pressure look for second jobs, and that mortgage holders are not the only people doing it tough: renters, lower-income households and people with no savings buffer have nowhere left to cut. Chalmers’s line is that the government takes responsibility for its part. None of the official statements answers the business owner whose staff are gone, and the $40,000 figure is the commenter’s own account of the commenter’s own loan, not a figure the Bank checked.

The Board’s scenario testing showed more borrowers falling into arrears and negative equity as rates rose, without financial-stability implications, Bullock said. The banks remain solid, she said, and the prudential regulator is watching loan-to-valuation and debt-to-income ratios.