The Reserve Bank lifts the cash rate to 4.85 per cent in a split vote

The Reserve Bank of Australia (RBA) raised the cash rate, the official interest rate it sets, by 0.25 percentage points to 4.85 per cent on Tuesday 3 November 2026. The new rate applies from 4 November. It is the fifth rise this year and takes the cash rate to its highest level since 2008, ABC News reported.

The Board was divided, with six votes to three

The RBA's Monetary Policy Board has nine members. Six voted to raise the cash rate and three voted to hold it at 4.60 per cent, the Bank's statement said. ABC News reported that this was the fourth split decision since the current Board began in early 2025, and the third this year.

At her media conference, the RBA Governor said the three members who preferred to hold gave more weight to the risks of a weaker economy: the fall in housing prices, rising unemployment and wage growth that has not picked up. The Governor said those members still saw a risk that inflation would run higher than forecast.

Our article of 9 October covered the September rise to 4.60 per cent. Since then, inflation rose to 4.3 per cent in the year to September, as our article of 29 October reported.

The Reserve Bank says demand in the economy is still running ahead of supply

The Board's statement said underlying inflation remains high and broadly based. It pointed to higher fuel and commodity prices linked to the conflict in the Middle East, pressure on the economy's capacity that is a little tighter than the Bank had estimated, and fast price growth in technology related goods as investment in artificial intelligence grows. Many firms report rising costs and plan to raise their prices.

The Governor said the main concern is demand at home, rather than oil prices, which an Australian central bank cannot influence. Weak productivity growth limits how fast the economy can grow without adding to inflation, and investment, including in data centres, has been stronger than expected. She said "some pain now will prevent even worse pain down the track."

The new forecasts show inflation staying higher for longer

The RBA published new forecasts in its Statement on Monetary Policy on the same day:

• Inflation. The Bank does not expect inflation to fall to the top of its 2 to 3 per cent target range until late 2027, about three quarters later than it forecast in August. It expects a return to the middle of the range by mid 2028. ABC News reported a forecast of 4.5 per cent for headline inflation at the end of 2026, up from 3.6 per cent three months earlier.
• Growth and jobs. Economic growth is expected to slow further over the coming year, with weaker household spending and home building. Employment is expected to keep growing, while unemployment is projected to rise by more than the Bank forecast in August. It was 4.7 per cent in September.
• Wages. ABC News reported that the forecasts show wages rising 3.4 per cent this financial year and prices 3.7 per cent, a small fall in real wages.

The Governor gave no guidance on the next move. She said the most recent rises had not yet fully flowed through to the economy and that the Board would watch the data closely. The Board meets next on 8 December, and the minutes of the November meeting are due on 17 November. The full statement by the Monetary Policy Board is on the Reserve Bank's website.

Economists differ on what comes next

Views on the path from here vary, ABC News reported on 3 November. Commonwealth Bank's economists expect the cash rate to stay at 4.85 per cent until cuts in August and November 2027. Capital Economics expects no further rises. Betashares expects at least one more rise, most likely in February 2027, and ANZ's economists see some risk of a rise to 5.10 per cent in December or February. These are the views of others, and the Board makes its own decision at each meeting.

The S&P/ASX 200 index closed 0.3 per cent higher, and the Australian dollar fell 0.3 per cent to 69.76 US cents after the decision, ABC News reported.

Banks have started to lift savings rates

Several banks announced higher variable savings rates within hours. By the evening of 3 November, Finder's tracker listed rises of 0.25 percentage points at ANZ, Westpac and ING from 13 November, and at Macquarie Bank from 19 November, among others. Bonus rates often come with conditions, such as adding a set amount each month, and introductory rates last only a few months. The same tracker had not yet recorded changes to term deposit rates.

For borrowers, Canstar estimated that a rise of 0.25 percentage points adds about $77 a month to repayments on a $500,000 variable home loan, if a lender passes it on in full.

A rise in the cash rate can lift the interest on new deposits and on variable cash accounts. A term deposit already in place keeps its rate until it matures. Deposits are protected by the Australian Government's Financial Claims Scheme up to $250,000 for each account holder at each bank, building society or credit union incorporated in Australia.

We arrange high interest cash accounts, term deposits, government and corporate bonds and managed funds. Your adviser can compare the rates now on offer, look at how different terms could fit with when you need your money, and contact you before a deposit matures.

If you would like to talk about what the higher cash rate could mean for your savings, investments or borrowing, 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