RBA Lifts Rates to 4.85% and Pushes Inflation Relief Out to Late 2027

The Reserve Bank lifted the cash rate target by 0.25 percentage points to 4.85% on 3 November 2026, its fifth increase this year. The board split six to three, with three members voting to hold at 4.60%.

The bigger change for anyone running a business is in the forecasts. The RBA now expects inflation to stay above 3% for the coming year and not to reach the top of its 2 to 3% target range until late 2027, about three quarters later than it previously forecast. The cash rate started 2026 at 3.60%, so this year's five increases, in February, March, May, September and November, add up to 1.25 percentage points.

Some rates moved before the RBA did

Not every rate waits for the announcement. Lenders fund themselves in money markets, and those markets price in an expected rise before it happens. The RBA's own figures show the three-month bank bill rate averaged 4.80% in October, while the cash rate target was 4.60%. The three-year government bond yield, which tracks where markets expect rates to go over the next few years, ranged from 4.81% to 4.97% in October.

That puts your finance on one of three clocks. Business facilities priced off the bank bill rate reset at each rollover, so one that rolled over in October has already picked up much of the expected rise. Fixed-rate quotes for equipment, vehicles and business loans are set from what lenders pay to borrow, so an October quote was priced when markets were already expecting higher rates. Standard variable rates move last, on a date each lender sets after the announcement, often a week or two later.

Why the forecast matters more than the hike

The harder question is how long this lasts. The RBA said it will keep doing what it considers necessary to bring inflation back to target, and its own forecast now has inflation above target for most of 2027. A budget for next year that pencils in rate relief by mid-2027 is relying on an outcome the RBA's forecasts do not point to.

The statement also says the RBA's liaison with businesses shows many firms facing cost pressures are raising their prices or looking to. Expect more price rises from suppliers, and expect customers to be seeing increases from most of the businesses they buy from.

The RBA expects higher rates and falling house prices to weigh on household spending and home building, while business investment is forecast to grow faster in the near term. If you sell to households, particularly in housing-linked trades or discretionary retail, plan around that split. It also says AI-related investment is driving rapid growth in the prices of technology-related goods.

What to do now

Work out which clock each facility runs on. Compare the rate on the last rollover of any bill-priced facility with the one before, because some of this rise may already be in your costs. If you hold a fixed-rate quote from October, check its expiry date before assuming the announcement made it dearer. For variable loans, read the lender's notice and put the higher repayment in the right week of your cash flow forecast.

Rebuild your 2027 budget at 4.85%. Run the current rate through every variable facility, from overdrafts to lines of credit, then test it with another 0.25 percentage points, the size of each move this year. If the budget only works with a cut, it needs a different plan.

Review your own prices before your suppliers' increases land. Start with the products or jobs where your margin has shrunk most since January. A measured rise with notice to regular customers is easier to make while price rises are widespread than in a quiet market.

If computers, servers or other technology hardware are on your list, get dated quotes now. A quote with a validity period shows whether prices are moving and gives you a firm figure to budget around, whether you pay cash or finance the purchase.

This article is general information only and is not financial advice.