Inflation jumped to 4.3% in the year to September, and within hours every one of the big four banks was forecasting a rate rise on Melbourne Cup Day. Markets now put the odds at around 85%. If it happens, the cash rate would go to 4.85%, its highest setting since November 2008. Here's what the numbers showed, why a rise now looks likely, what it would cost at different loan sizes, and what you can do in the five days before the Reserve Bank decides.
The short version
- Headline inflation rose to 4.3% in the 12 months to September, up from 4.0% in August (ABS, released 28 October).
- The RBA's preferred measure, the quarterly trimmed mean, rose 1.0% in the September quarter, above the RBA's own August forecast of 0.8%.
- CBA and NAB switched from a hold to a hike on Wednesday afternoon. All four majors now expect a 0.25 percentage point rise to 4.85% on Tuesday 3 November.
- Market pricing for a November rise is around 85% (ABC, citing Bloomberg data).
- Canstar estimates a rise would add about $92 a month on a $600,000 loan, or $456 a month across five rises this year. The decision is due at 2:00pm Adelaide time on Tuesday.
What the inflation figures showed
The Australian Bureau of Statistics released its September figures at 11:00am Adelaide time on Wednesday. Prices rose 0.8% in the month alone, taking annual headline inflation to 4.3%, up from 4.0% in August. That was a little hotter than most economists expected; NAB and the market consensus had pencilled in 4.2%.
Housing was the biggest contributor, up 5.2% over the year, driven by new dwelling prices and electricity. New dwelling prices rose 4.7% over the year, which is actually down from 5.4% in August, as builders kept passing on higher costs for materials and labour. Transport was the second-biggest driver, up 8.7%, largely because petrol rose another 9.4% in September alone, after a 14.8% jump in August. The ABS put that down to higher world oil prices.
Petrol is volatile, which is why the RBA leans on underlying measures that strip out the biggest swings. In September, fuel was excluded from the trimmed mean altogether. Even so, underlying inflation still edged up.
The two trimmed mean numbers, explained
You may see two different underlying inflation figures quoted this week, and both are correct.
- The monthly measure: the ABS says annual trimmed mean inflation was 3.6% in September. August, first reported as 3.6%, has been revised down to 3.5% because of a change in seasonal factors. So on this measure underlying inflation went up, not sideways.
- The quarterly measure: the trimmed mean rose 1.0% over the September quarter. On that quarterly basis the annual rate came in at 3.7%, as reported by NAB, CommBank and AAP.
The quarterly figure is the one the RBA forecasts and watches most closely. In August the RBA expected a 0.8% rise for the quarter. A result of 1.0% is in line with what economists expected, but it is above the central bank's own script. Betashares chief economist David Bassanese told the ABC the result was "confirmation that those inflation risks have indeed materialised." Underlying inflation has now been above the RBA's 2–3% target band for 14 consecutive months, according to Canstar.
Why all four big banks now expect a rise
Before Wednesday, the big four were split: ANZ and Westpac expected a November rise, while CBA and NAB expected a hold. That changed within hours of the release. Both CBA and NAB updated their forecasts on Wednesday afternoon, and all four now expect the RBA to lift the cash rate by 0.25 percentage points to 4.85%. Canstar notes the cash rate hasn't been above that level since November 2008. CommBank notes it would be the fifth rise of 2026.
Interestingly, the banks say the inflation numbers themselves weren't the main surprise. They were broadly as expected. What shifted the calls was what the RBA said on the same day. Governor Michele Bullock told a Senate committee that "the labour market seems a little tighter than we had previously judged", despite unemployment rising more than the RBA expected. NAB reads that as the RBA deciding it needs to slow the economy further to get inflation back to target, and it expects the RBA to "likely pause post November" after one more rise.
Markets moved quickly too. The ABC reported that pricing for a November rise surged to about 85% after the release, according to Bloomberg data. Marc Jocum of Global X summed up the mood to AAP: "This is an ugly number for the RBA and significantly strengthens the case for another rate hike next week."
None of this is certain. The RBA board makes the call, and forecasts are not decisions. But with every major bank and most of the market expecting the same outcome, it makes sense to plan as if it's coming.
What a November rise would cost you
Canstar has modelled what a 0.25 percentage point rise in November would add to minimum monthly repayments, and what five rises this year add up to, at different loan sizes:
| Loan size at start of 2026 hikes | Extra per month from a November rise | Extra per month across five 2026 rises |
|---|---|---|
| $500,000 | +$77 | +$380 |
| $600,000 | +$92 | +$456 |
| $700,000 | +$107 | +$532 |
| $800,000 | +$123 | +$607 |
| $900,000 | +$138 | +$683 |
| $1 million | +$153 | +$759 |
Source: Canstar, 28 October 2026. Based on an owner-occupier paying principal and interest with 25 years remaining in February 2026, at the RBA's average variable rate, assuming a November rise passed on in full by lenders the month after. Changes are to minimum repayments.
"A 0.25 increase will add roughly $92 a month to an average $600,000 debt with 25 years remaining, pushing the total increase to repayments this year to $456," said Canstar's Sally Tindall. "That's close to half a grand extra a typical borrower will have to pay compared to just 12 months before."
These are illustrations, not your numbers. Your actual change depends on your balance, rate, remaining term and whether your lender passes the rise on in full. As a rough guide, it's about $15 a month for every $100,000 owed.
What you can do before Tuesday
- Plan as if it's coming. With all four majors and around 85% of the market expecting a rise, budget now for the higher repayment. Lenders usually pass rises on within a few weeks, so the extra could start showing up from December. Find your loan size in the table above and check your buffer. If the RBA holds, treat it as a bonus.
- Use the five days to review your rate. If you've been meaning to ask your lender for a better rate, do it before Tuesday. Compare refinance options using comparison rates, not just headline rates, and factor in fees and any switching costs. The cheapest sub-6% variable deals were already thinning last week.
- Thinking of fixing? Fixed rates already price in expected rises. Fixing can give certainty, but it's a trade-off, not a guaranteed win, and break costs apply if you exit early.
- Buying soon? Lenders assess applications at your rate plus a buffer, commonly 3 percentage points, so a higher rate reduces how much you can borrow. If you have pre-approval, get it rechecked before you bid or sign.
- If repayments are already tight, talk to your lender early. Hardship arrangements exist, and the National Debt Helpline is free on 1800 007 007.
What happens next
The RBA board meets on Monday and announces its decision at 2:00pm Adelaide time (2:30pm AEDT) on Tuesday 3 November, Melbourne Cup Day. The cash rate is currently 4.60%. The RBA will also release updated economic forecasts in its November Statement on Monetary Policy. CommBank expects those to show higher inflation, weaker growth and higher unemployment than in August.
Beyond November, the banks expect a pause rather than a string of further rises, though none is ruling more out. On Canstar's forecast tracker, CBA, NAB and Westpac currently see the first cuts from August 2027 and ANZ from November 2027. Those are forecasts, and a lot can change between now and then. We'll cover the decision on Tuesday afternoon.
Related reading
- Today's inflation number could decide a fifth rate rise on Melbourne Cup Day (Wednesday 28 October, our preview of the figures)
- The RBA just said inflation looks "materially worse" (Saturday 24 October)
- Unemployment just hit a five-year high (Friday 16 October)
- Advertised rate or comparison rate? Which number to look at and Fixed rates are rising faster than the cash rate
Want to know what Tuesday could mean for you?
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Sources: 1. Australian Bureau of Statistics, "CPI rose 4.3% in the year to September 2026", media release, 28 October 2026 — headline 4.3% (4.0% in August); housing +5.2%; new dwellings +4.7% (5.4% in August); transport +8.7%; automotive fuel +9.4% in September (+14.8% in August); trimmed mean 3.6% annual, August revised to 3.5%; September quarter CPI +1.3%, trimmed mean +1.0% (https://www.abs.gov.au/media-centre/media-releases/cpi-rose-43-year-september-2026). 2. Canstar, Laine Gordon, "Inflation to push cash rate back to highest setting since GFC", 28 October 2026 — all four majors forecast +0.25 to 4.85%; highest since November 2008; 14 consecutive months above target band; repayment table; Sally Tindall quotes (https://www.canstar.com.au/news/inflation-push-cash-rate-back-highest-since-gfc/). 3. CommBank Newsroom, "CommBank economists forecast November RBA interest rate hike as inflation risks build", 28 October 2026 — fifth rise of 2026; quarterly trimmed mean 3.7% annual; outlook for November forecasts (https://www.commbank.com.au/articles/newsroom/2026/10/commbank-november-rba-rate-hike-inflation-risks.html). 4. NAB, "RBA Watch: NAB now expects the RBA to hike in November", 28 October 2026 — Governor Bullock quote; NAB and consensus 4.2% headline forecast; likely pause after November (https://www.nab.com.au/news/interest-rates/rba-watch--nab-now-expects-the-rba-to-hike-in-november-). 5. ABC News, Stephanie Chalmers, "Inflation rate rises to 4.3 per cent in September, raising rate hike expectations", 28 October 2026 — about 85% market pricing (Bloomberg); David Bassanese quote (https://www.abc.net.au/news/2026-10-28/inflation-september-cpi-ahead-of-november-interest-rate-call/107317382). 6. AAP, Jacob Shteyman, "November rate hike a lock after 'ugly' inflation result", 28 October 2026 — RBA August forecast 0.8%; Marc Jocum quote (https://aapnews.aap.com.au/news/the-figures-to-watch-ahead-of-melbourne-cup-rate-call). 7. Canstar interest rate forecast tracker — big four rate-cut timing forecasts (https://www.canstar.com.au/home-loans/interest-rate-forecast-australia/). 8. RBA cash rate target 4.60%; next Monetary Policy Decision Tuesday 3 November 2026, 2:30pm AEDT.
General information only, not credit advice.
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