Cash rate in Australia - Data and Analysis (1991-2034)

IBISWorld forecasts the cash rate to rise by 0.72 percentage points in 2026-27, to average 4.56%. Sustained underlying inflationary pressures that emerged in the second half of 2025-26 prompted the RBA to lift the cash rate to 4.35% in May 2026. The Bank maintained this restrictive setting at its June and August meetings. Although annual CPI inflation eased from 3.8% in June to 3.5% in July 2026, the decline largely reflected the timing of government energy rebates and slower growth in housing costs. Underlying inflation remained elevated, with trimmed mean inflation holding at 3.6% over the year to July. The RBA's hawkish communication and the major banks' recent decisions to bring forward their rate-rise forecasts support the prospect of further tightening and a prolonged period of restrictive monetary policy.Australia's elevated interest rate environment is likely to persist through 2026-27, with further tightening possible if Middle East supply disruptions keep global oil prices volatile and add to domestic inflationary pressures. Disruptions to shipping through the Strait of Hormuz have raised fuel costs, which flow through supply chains by increasing transport, material and utility expenses for producers, manufacturers and retailers. Businesses are likely to pass some of these higher costs on to consumers, particularly where margins are constrained, prolonging above-target inflation. Persistent inflation would limit the RBA's capacity to lower the cash rate and could necessitate further monetary tightening.Australia's interest rate environment has shifted sharply over the five years through 2026-27, from the pandemic-era monetary stimulus to strong monetary restraint. The RBA cut the cash rate to a record low of 0.1% in 2020-21 to support households and businesses through the recession. Low borrowing costs stimulated economic activity as pandemic restrictions eased, but strong demand later collided with global supply-chain disruptions and rising energy and commodity prices following Russia's invasion of Ukraine. These pressures drove annual CPI inflation to 7.8% in 2022, prompting the RBA to begin a sustained rate-hiking cycle. The cash rate reached 4.35% in December 2023 and remained at that level until the RBA began easing policy in February 2025. As inflationary pressures began to subside, the Bank reduced the cash rate to 3.6% by August 2025. However, geopolitical tensions in the Middle East disrupted global energy markets, interrupted the disinflation process and renewed inflationary pressures. The RBA subsequently reversed its earlier easing, lifting the cash rate to 4.35% in May 2026, where it remained as of late September 2026.