Households carry the inflation fight as rates hit a 15-year high

The fourth rise and what the numbers show

The Reserve Bank of Australia's Board voted unanimously on 29 September 2026 to lift the cash rate target by 25 basis points to 4.60 per cent, a 15-year high and the fourth increase this year.^[1]

The RBA's trimmed mean measure of underlying inflation came in at 3.6 per cent over the year to the June quarter 2026, sitting above the top of the Bank's target range by 0.6 percentage points.^[2] Three earlier increases this year had not pulled that figure back into range.

The IMF projects Australian inflation at 3.9 per cent in 2026, with only six advanced economies forecast to record a higher rate.^[3]

Who is paying and what the data says about the cost

Equifax data show mortgage demand dropped 19.2 per cent in September from a year earlier, the weight of four rate rises falling on borrowers already facing high living costs. Governor Michele Bullock acknowledged the burden in August. "I know that these increases have been tough for households with mortgages who are also facing high inflation. But they were necessary."^[7]

Tighter credit conditions are cooling home lending and reducing discretionary spending across the broader economy, which is the transmission mechanism the Bank is relying on to bring inflation down. Whether that channel has opened wide enough remains unanswered.

The labour market complicates the picture. The unemployment rate climbed to 4.6 per cent in August 2026 in seasonally adjusted terms.^[4] ABS head of labour statistics Sean Crick said the August result reflected a market in transition: "This month there was 39,000 more people in employment, and 28,000 more people in unemployment."^[4] The labour force grew, lifting the participation rate 0.2 percentage points to 67.1 per cent.

The spending question, and why Thursday matters

What the Bank should say more plainly is how much public spending on infrastructure and social programs adds to the demand it is trying to cool. Rate rises hit household demand directly; they barely touch demand generated by public capital works.

That asymmetry matters when assessing whether the current settings are sufficient. If a meaningful share of that activity flows from public spending, rate rises are targeting only part of the inflation engine.

The Bank has said the increases were necessary, though it has stopped short of saying they will be sufficient on their own. That distinction is growing more consequential with each meeting, and Treasury carries as much responsibility for answering it as Martin Place does.

The ABS has scheduled the release of September 2026 labour force figures for 15 October 2026.^[5] Those numbers will show whether four rate rises have begun to ease genuine workforce pressure, or whether the inflation fight requires a second instrument alongside monetary policy.