The Reserve Bank has raised interest rates on Melbourne Cup day for the fifth time this year, lifting the cash rate target by 25 basis points to 4.85%, effective today. The ABC reports the cash rate has not been this high since late 2008.

The decision was not unanimous. “Today’s policy decision was by majority: six members voted to increase the cash rate target by 25 basis points to 4.85 per cent; three members voted to leave the cash rate target unchanged at 4.60 per cent,” the Monetary Policy Board said.

Why the board moved

The board said inflation remains elevated and broadly based, and that the outlook had been “revised materially higher”, partly because of higher fuel and commodity prices linked to the conflict in the Middle East. Inflation is now not expected to reach the top of the 2–3% target range until late 2027, “around three quarters later than previously forecast”.

It also pointed to AI-related investment driving rapid growth in prices for technology-related goods, and said business liaison showed many firms facing cost pressures were raising prices or looking to do so. “The Board is conscious of the period in which inflation has been too high,” the statement said.

At the same time, the board acknowledged the economy is slowing, housing prices have fallen significantly and unemployment has risen. The ABC reported the RBA now expects the unemployment rate to average 5.1% in the December quarter of 2028, up from its August forecast of 4.8%. The jobless rate is currently 4.7%.

Bullock: “some pain now”

Governor Michele Bullock said the decision was “not the news that many Australians want to hear, but it is what’s needed to get inflation down”, and that “some pain now will prevent even worse pain down the track”, the Guardian reported.

Explaining the split, she said of the three members who wanted to hold: “They felt that there were potential downside risks in these circumstances, particularly since we’d already done four interest rate rises, and maybe we should wait a bit longer to get some more data to test that,” she said.

On the risk of recession, she said: “I want to be absolutely clear here… We are not looking to tip the economy into recession if we can avoid it. But we do need to get inflation down, and we do have excess demand at the moment, so that is the key.”

Treasurer Jim Chalmers said the rise would be “difficult news” for Australians already paying a “hefty price”, adding: “Our budgets are not what’s putting upward pressure on inflation. But we can play a helpful role and that’s what we intend to do.”

What lenders are doing

Macquarie Bank was the first major lender to confirm it would pass on the full increase, lifting variable home loan rates by 0.25 percentage points from 19 November, with transaction and savings account rates rising by the same amount on the same day. “To help our variable home loan customers prepare, we’re again waiting more than two weeks before this latest increase takes effect,” head of personal banking Ben Perham said.

As of early Wednesday, Westpac and ANZ said on their websites that their rates were under review, and none of the big four had announced a change.

What comes next

The board did not commit to further moves, saying it “will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions”. Its final meeting for the year concludes on 8 December. For business borrowers on variable facilities, now is a sensible time to re-run cash-flow forecasts at the new rate and check covenant headroom before renewals.

Sources: RBA, Statement by the Monetary Policy Board (3 November 2026); ABC News (3 November 2026); The Guardian Australia live coverage (3 November 2026); Nine.com.au (3 November 2026); ACT Treasury, Official Cash Rate Decision (3 November 2026); Westpac and ANZ interest rate pages.