What’s Happening Right Now
Australia’s latest inflation update has shifted the entire monetary policy outlook for many economists. The first monthly inflation print for Q4 came in much higher than expected, suggesting prices are moving away from the RBA’s 2–3% target range.
Key facts in the October data:
- Core inflation running at ~4% (annualised) since the start of FY26
- Headline inflation tracking toward 4% for the year
- Inflation is broad-based, with 40 out of 87 CPI items rising by over 1% in a single quarter
- Core housing inflation (rents + new builds) running at a 4% annualised pace
- Market services and goods inflation rose 1.3% in October alone
This signals that inflationary pressure is not easing, and the RBA may need to move sooner and more firmly than previously forecast.
What the RBA May Do in 2026
Because inflation is proving sticky, strong, and broad-based, some economists now expect the RBA to tighten policy earlier in 2026, not later.
The revised forecast now shows:
- 25bp rate hike in May 2026
- Another 25bp hike in August 2026
Taking the cash rate from 3.6% → 4.1%
Financial markets are already positioning for this:
- The 3-year government bond yield is now 25bp above the cash rate, historically a strong indicator of future rate rises.
- Money markets are beginning to price in the probability of a May rate hike.
At the same time, the economy is showing signs of recovery:
- Q3 business investment jumped 6.4%
- Expected FY26 capital expenditure revised upward
- Non-mining investment projected to grow 7%
This combination — strong economic activity + higher inflation — increases the risk of earlier rate rises.
What This Means for Homeowners, Buyers & Investors
If forecasts are correct, 2026 may not be the easing cycle many borrowers were waiting for. Instead, we may experience:
✔️ Higher mortgage repayments from mid-2026
Borrowers on variable rates — or those coming off fixed terms — may face increased repayment pressure.
✔️ Tighter borrowing capacity
Any rate increase reduces how much lenders will allow clients to borrow.
✔️ Refinancing windows closing quickly
As markets pre-price rate hikes, the cost of funds rises before the RBA moves. That means some lenders may lift rates ahead of the RBA, narrowing opportunities for borrowers to secure better deals.
✔️ A more urgent environment for loan reviews
With inflation sticky and rate hikes moving forward, it becomes much riskier to “wait and see.”
The borrowers who benefit most in these conditions are the ones who prepare early.
What You Should Do Now
Before lenders adjust rates or borrowing capacity tightens further, now is the time to:
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Review your current loan structure
Ensure your rate, features, and repayments are still working for you in a rising rate environment.
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Assess refinancing opportunities now, not mid-2026
Markets often move faster than the RBA. Early movers secure the best pricing.
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Discuss fixed, variable, or split loan strategies
A tailored structure may help insulate against expected mid-year rate changes.
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Understand how inflation and rate projections affect your long-term goals
Whether upgrading, investing, or consolidating debt, knowing your borrowing power ahead of time is critical.
Glass Financial can help.
Our brokers continuously monitor economic data, lender pricing, and policy changes. A short discussion now can help position you ahead of the curve and potentially save you thousands before the next tightening cycle begins.
Ready to prepare for 2026 with confidence?
Book a loan review with your Glass Financial broker today.
We’ll help you understand how these shifts affect you and identify opportunities before the market moves.
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Source: ABS Monthly CPI Indicator (Oct 2025), RBA data, and major bank economic forecasts.
Disclaimer – Glass Financial
The information provided by Glass Financial is intended for general educational purposes only and should not be considered financial, legal, or investment advice. It has been prepared without taking into account your individual objectives, financial circumstances, or needs.
Before making any decisions regarding loans, financial products, or investments, you should carefully consider whether the information is appropriate to your personal situation. We recommend seeking advice from a qualified and licensed professional.
Any references to loan products relate only to those offered by lenders on the Glass Financial panel. Not all brokers have access to all lenders or products.
Glass Financial Pty Ltd (ABN: 27 614 341 525) is committed to providing clear, honest, and transparent lending guidance. While every effort has been made to ensure the accuracy of the information provided, Glass Financial accepts no responsibility for any loss arising from reliance on this information.
