RBA Interest Rate Outlook 2026-27

The RBA held the cash rate at 4.35% at its June 2026 meeting, pausing after three consecutive 25 basis point hikes in February, March, and May 2026. Three of Australia's four major banks forecast 4.35% as the peak, while Westpac expects two further hikes to 4.85% by September 2026. No bank forecasts a rate cut in 2026 — the earliest projected cut ranges from mid-2027 (NAB) to late 2027 (ANZ).

Data in this article is sourced from RBA statements, major bank economic research, and published forecasts as at 5 July 2026.

The path to 4.35%

The cash rate started 2026 at 3.60%. The RBA raised rates three times in quick succession:

February 2026: 3.85% (+25bp) — responding to sticky services inflation and a tight labour market
March 2026: 4.10% (+25bp) — inflation had not fallen as quickly as forecast, and wage growth was exceeding expectations
May 2026: 4.35% (+25bp) — the RBA judged that a cash rate of 4.10% was not sufficiently restrictive to return inflation to the 2-3% target band within a reasonable timeframe

The May 2026 split vote

The May meeting recorded the first publicly disclosed split vote under the RBA's new dual-board structure. The Monetary Policy Board voted 8-1 to raise the cash rate to 4.35%, with one member dissenting in favour of holding at 4.10%. The publication of individual votes — modelled on the US Federal Reserve practice — has given markets and borrowers unprecedented transparency into the Board's decision-making.

June 2026: hold at 4.35%

The Board held at 4.35% at its 16 June 2026 meeting, noting that the full effects of the three rate hikes were still flowing through the economy and that it was appropriate to pause and assess the data. The Board reiterated that it "remains resolute in its determination to return inflation to target" and "will do what is necessary to achieve that outcome."

Major bank forecasts

The economic teams at Australia's four major banks have diverged in their outlook for the cash rate:

CBA: Peak at 4.35%. First cut not until second half of 2027. CBA expects the RBA will not need to hike further, with the lagged effect of the 2026 hikes and the mortgage cliff (fixed-rate roll-offs) adding sufficient restraint.
ANZ: Peak at 4.35%. First cut mid-to-late 2027. ANZ shares the view that 4.35% is the peak but expects the RBA to hold at this level for an extended period — potentially 12-18 months — before beginning to ease.
NAB: Peak at 4.35%. First cut mid-2027. NAB's central case is that inflation will be sufficiently close to the midpoint of the target band by mid-2027 to justify a modest easing cycle.
Westpac: Peak not yet reached. Forecasts two further hikes to 4.85% by September 2026. Westpac's analysis suggests the labour market remains too tight and services inflation too sticky for the RBA to stop at 4.35%.

No major bank forecasts a rate reduction in 2026.

RBA's own technical assumption

The RBA's May 2026 Statement on Monetary Policy includes a technical assumption of a 4.70% cash rate by December 2026. This is not a forecast or a commitment — it is a working assumption used to produce the published economic projections. However, it does indicate that the Board's own modelling is calibrated around the possibility of further tightening.

The new dual-board RBA

The Reserve Bank's governance was reformed from 1 March 2025, splitting the single Board into two separate bodies:

Monetary Policy Board

Solely responsible for setting the cash rate
Chaired by the Governor, includes the Deputy Governor, Treasury Secretary, and external experts
Meets eight times per year (reduced from 11, but meetings are longer)
Publishes individual member votes after each decision
Governor holds a press conference after every meeting

Governance Board

Responsible for institutional operations: staffing, budgets, strategy
Separate membership from the Monetary Policy Board
Allows the Monetary Policy Board to focus exclusively on the economic outlook and rate decisions

The first publicly recorded split vote — the 8-1 decision in May 2026 — demonstrated the practical impact of the new transparency regime. The dissenting member's vote was published along with the majority decision, giving markets and the public insight into the range of views on the Board.

What will trigger the first rate cut

For the RBA to begin cutting rates, several conditions will likely need to be met:

Inflation sustainably within the 2-3% target band: The RBA has repeatedly emphasised "sustainably" — a single quarterly print in the band is not enough. The Board wants confidence that inflation will stay within the band over the medium term.
Wage growth moderating: The RBA judges current wage growth (around 4%) as consistent with the inflation target only if productivity growth improves. Without productivity gains, wage growth will need to ease.
Labour market loosening: The unemployment rate needs to rise from current levels, signalling that demand in the economy is cooling sufficiently.
Global conditions stabilising: The Middle East conflict, elevated oil prices, and global trade tensions are all adding to domestic inflationary pressures. A deterioration in any of these could delay cuts.

What this means for mortgage holders

For borrowers on variable rates, the cash rate at 4.35% means variable home loan rates are sitting around 6.0-6.5% for owner-occupiers. If Westpac's forecast of two further hikes materialises, variable rates would rise to approximately 6.5-7.0%.

For fixed-rate borrowers, the 2026-27 year is challenging for those rolling off low fixed rates:

A borrower who fixed at 2.0% in 2022 and is rolling off in 2026 faces a rate reset to approximately 6.25%
On a $500,000 mortgage, this increases monthly repayments from roughly $2,120 to $3,100
Borrowers in this position should engage with their lender early about hardship arrangements or restructuring options

The APRA serviceability buffer of 3% remains in place, meaning new borrowers must demonstrate they can afford repayments at approximately 9.25% — a level well above what most borrowers are actually paying.

Next RBA meetings

Upcoming RBA Monetary Policy Board meetings:

11 August 2026
30 September 2026
4 November 2026
9 December 2026

FAQ

When will interest rates start coming down?

No major bank forecasts a cut in 2026. The earliest projected cut is mid-2027 (NAB), with ANZ and CBA expecting cuts in the second half of 2027. Westpac, the outlier, does not forecast cuts before 2028.

Why did the RBA raise rates three times in 2026?

Inflation — particularly services inflation — was not falling as quickly as the RBA had forecast. Wage growth was exceeding expectations, and the labour market remained exceptionally tight. The RBA judged that a more restrictive cash rate was needed to return inflation to the 2-3% target band.

What is the RBA's inflation target?

The RBA targets consumer price inflation of 2-3% on average over time. This is a flexible inflation target — the RBA also has a dual mandate to pursue full employment.

How does the new RBA board structure affect rate decisions?

The Monetary Policy Board now focuses exclusively on the cash rate, with published individual votes and press conferences after every decision. The Governance Board handles institutional operations. The transparency reforms mean borrowers can now see how each Board member votes, providing insight into the range of views.

What happens if my fixed rate expires in 2026-27?

Contact your lender before your fixed rate expires. Ask about rate negotiation, restructuring options, and hardship arrangements. If you cannot service the loan at the new rate, early engagement with your lender is critical — lenders have obligations to work with customers in financial difficulty.