Cash Rate Decision
Key Takeaways
Cash Rate Increased: The RBA has lifted the cash rate by 25 basis points to 4.10 per cent, signalling a further anticipated tightening of monetary policy.
Inflation Risks Rising: Inflation has increased again after easing from its 2022 peak, with the RBA noting a material lift in the second half of 2025 driven by stronger capacity pressures and rising fuel costs linked to global conflict, including from overseas wars.
Demand and Labour Market Remain Strong: Private demand and labour market conditions have remained resilient, with low unemployment and solid business investment contributing to ongoing inflationary pressures.
The RBA has increased the cash rate to 4.10 per cent in response to renewed inflationary pressures and rising risks to the outlook. While inflation had been moderating, the Board observed a material pick-up in the second half of 2025, with recent data suggesting that capacity pressures across the economy are greater than previously assessed. Higher fuel prices, largely driven by conflict in the Middle East, are also expected to add to near-term inflation, with the long-term impact unknown.
Economic activity has remained stronger than expected. Private demand picked up through late 2025, supported by robust business investment, while consumption outcomes were more subdued. Housing market activity and prices have grown strongly over the past year, though signs of moderation emerged in early 2026. Financial conditions have tightened somewhat, but the full effects of earlier rate reductions are still flowing through the economy.
Labour market conditions remain tight. The unemployment rate is slightly lower than anticipated, and labour underutilisation remains low. While growth in unit labour costs has eased somewhat, the labour market continues to contribute to capacity pressures, thereby sustaining inflation.
What Impacted the RBA’s Decision
The decision to raise the cash rate reflects that inflation risks have increased. A wide range of data confirmed that inflationary pressures picked up materially in the second half of 2025, with private demand growing more quickly than expected and capacity constraints tighter than previously assessed.
Stronger housing market activity, readily available credit, and persistently tight labour market conditions all contributed to the Board’s view that inflation will remain above target without further policy restraint. Internationally, while uncertainty and geopolitical risks persist, recent economic growth among Australia’s major trading partners has surprised on the upside and has not materially dampened domestic conditions.
Moving Forward
Looking ahead, the RBA reiterated that it remains attentive to the data. The Board will closely monitor developments in domestic demand, labour market conditions, wage growth and inflation, as well as global economic and financial market trends. With demand momentum strong and capacity pressures elevated, the RBA signalled that it remains focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.
Today’s decision was made by a majority decision, with five members voting to increase the cash rate target by 25 basis points to 4.10 per cent and four members voting to leave the cash rate target unchanged at 3.85 per cent. The RBA’s next monetary policy decision is scheduled for 5th May. The REIV will continue to monitor developments closely, as interest rate settings remain a key influence on borrowing capacity, investment activity and mortgage servicing across the real estate sector.