Five in a row, and the board splits three ways

The Reserve Bank took the cash rate to 4.85 per cent on Cup Day, its fifth rise of the year and the highest setting since 2008. Three of the nine board members wanted to hold. The question has shifted from how high rates go to whether 4.85 per cent is the top.

The Reserve Bank of Australia (RBA) lifted the cash rate by a quarter of a percentage point to 4.85 per cent on 3 November, the fifth increase of 2026 and a level the country has not seen since late 2008. The decision was not unanimous. Six members of the Monetary Policy Board voted for the rise; three wanted to leave the rate at 4.60 per cent. It is the same six-to-three margin the board recorded in July 2025, when the three in the minority wanted a cut rather than a hold.

That division is the story. A central bank that moves six-to-three is a central bank arguing with itself, and the minority view carries weight when the figures are this finely balanced. Underlying inflation, measured by the monthly trimmed-mean indicator the Bank watches most closely, sat at an annual 3.6 per cent in September, down from its peak but still above the 2 to 3 per cent target band. Headline inflation was hotter at 4.3 per cent, lifted by fuel and housing costs. The Bank now expects inflation to stay above 3 per cent for the coming year and does not see it returning to the top of the target range until late 2027.

For variable-rate borrowers the arithmetic is immediate. On Canstar's modelling, this rise adds about A$92 a month to the minimum repayment on a A$600,000 loan with 25 years left to run, and takes the total increase across the five rises of 2026 to about A$456 a month. Cumulative tightening of 125 basis points has lifted the average variable rate for owner-occupiers to around 6.7 per cent, on Cotality's estimate. Macquarie and the big four passed earlier rises through in full, and borrowers should expect the same here.

The question the market is already trading on is whether 4.85 per cent is the peak. The Australian dollar fell below US 70 cents after the decision, a sign that investors read the split board and the Bank's language as a signal that the tightening is close to done. The major lenders have largely fallen into line. Commonwealth Bank, National Australia Bank and Westpac all expect the Bank to hold in December, with Commonwealth Bank also tipping a hold in February. ANZ sits apart, flagging the risk of one more rise that would take the rate to 5.10 per cent. The next decision comes on 8 December.

The temptation is to read a divided board as a dovish one and call the top. We would be careful. The three dissenters lost, and the six who prevailed did so with headline inflation at 4.3 per cent and the Bank itself forecasting no return to the target range until late 2027. A board that has moved five times in a year has shown what it does when the quarterly figures surprise it. Our call is that 4.85 per cent holds in December, and that the part of the market already pricing a first cut is well ahead of the evidence.