The Reserve Bank lifts the cash rate to 4.60 per cent

The Reserve Bank of Australia raised its cash rate target by 0.25 percentage points to 4.60 per cent on 29 September 2026. The cash rate is what financial institutions pay each other to borrow overnight, and it strongly influences deposit and loan rates. The unanimous decision was the fourth increase this year and takes the cash rate to its highest level since 2011.

The Reserve Bank pointed to energy prices and persistent inflation

In its statement, the Bank's rate-setting Monetary Policy Board said inflation had been stronger than it expected. The widening conflict in the Middle East has lifted global energy prices well above the Bank's August assumptions. Demand linked to artificial intelligence is pushing up global prices for technology goods. The Board also cited pressure on the economy's capacity and high short-term inflation expectations, and wants to stop high inflation becoming entrenched.

The Governor told her media conference that demand was already running ahead of supply before the conflict began. The labour market is still somewhat tight, she said, with unemployment at 4.6 per cent. She gave no guidance on future moves, beyond saying the Board would lift rates further if needed.

A day later, the Australian Bureau of Statistics (ABS) reported that consumer prices rose 4.0 per cent in the year to August. The trimmed mean, a gauge of underlying inflation that leaves out the sharpest price moves, held at 3.6 per cent. Both are above the Reserve Bank's 2 to 3 per cent target.

The cash rate has risen by one percentage point in 2026

According to the Reserve Bank's records, the cash rate began the year at 3.60 per cent. The Board raised it to 3.85 per cent on 3 February, 4.10 per cent on 17 March and 4.35 per cent on 5 May. It held the rate in June and August, then raised it to 4.60 per cent on 29 September.

For borrowers, Commonwealth Bank, Westpac, NAB and ANZ are passing the full increase on to variable home loan rates from 9 October 2026. ANZ estimates this adds about $79 a month to repayments on a $500,000 owner-occupier principal and interest loan. The Governor called the decision "difficult for households with a mortgage and businesses with loans", while noting that overall measures do not point to severe household stress.

Savings rates are rising and term deposit rates moved early

Savings accounts you can draw on at any time pay variable rates. A Reserve Bank study in May 2026 found these rates have, on average, moved by less than the cash rate.

Commonwealth Bank, Westpac and NAB each lifted the total rate on a bonus savings account by 0.25 percentage points to 5.25 per cent from 9 October. The increase went only to the bonus part, which is paid in months when conditions such as adding to the balance are met. Base rates of 0.01 to 0.10 per cent were unchanged. The same study found around one fifth of money in such accounts earns only the base rate. It may be worth checking that your accounts meet their conditions.

Term deposit rates moved earlier. In the second half of September, before the decision, Commonwealth Bank and Westpac both lifted their 12 month rates to 5.30 per cent.

A term deposit fixes your rate for a set period. Its rate therefore reflects where interest rates are expected to be over that time, as well as where they are now. The Reserve Bank explains that banks price term deposits off bank bill swap rates, market rates that move largely on what investors expect the cash rate to do. So term deposit rates can rise before the cash rate does, or fall ahead of expected cuts.

Inflation figures and the November meeting come next

The ABS publishes September labour force figures on 15 October 2026. On 28 October it releases the September consumer price index, which also brings the September quarter figures. The Board meets on 2 to 3 November and announces its decision at 2.30 pm on 3 November. Its November Statement on Monetary Policy, with updated forecasts, comes out at the same time.

On 8 October, the ASX's rate tracker, which reads pricing in the futures market, put the chance of an increase in November at about 27 per cent. Among the major banks' economists at the start of October, Westpac and ANZ expected a rise to 4.85 per cent in November, while NAB and Commonwealth Bank expected a pause for now and saw a risk of a further increase.

Cash, term deposits and bonds can each play a part

Cash accounts keep money on hand, and their variable rates can rise with the cash rate. Term deposits fix a rate for a term, usually one month to five years, though withdrawing early can cost interest and may need up to 31 days' notice. The Government's Financial Claims Scheme protects deposits up to $250,000 per account holder at each bank, building society or credit union regulated by APRA, the banking regulator.

Bonds pay regular interest, called coupons, and repay their face value, the amount borrowed, at maturity if the issuer pays. When rates rise, the market value of existing fixed rate bonds can fall, while floating rate bonds have coupons that move with interest rates. Alongside managed funds and shares, cash, term deposits and bonds can help balance access to money, fixed rates and regular income.

If you would like to talk through what the higher cash rate means for you, please get in touch with your adviser.

This article is general information only. It does not take into account your objectives, financial situation or needs, and it is not a recommendation to buy, sell or hold any investment. Figures are as published on the dates given. Past performance is not a reliable indicator of future performance. Read the full risk warning