RBA Rate-Hike Threat Puts Household Budgets in Crosshairs

Australian households face more interest-rate increases as the Reserve Bank of Australia awaits inflation figures due Wednesday, October 28. The bank raised rates in September, and economists expect the latest data to strengthen the case for another increase. Decisions inside the central bank will land directly on household budgets.

Who Carries the Cost

Betashares chief economist David Bassanese said markets expected quarterly trimmed mean inflation to rise 1.0 per cent. That would match RBA deputy governor Andrew Hauser’s description of a result materially worse than the bank’s August forecast of 0.8 per cent, Bassanese said. He said that outcome should cement the case for a November rate rise.

The RBA has raised the cash rate four times in six meetings, adding 100 basis points in total and taking it from 3.60 per cent to 4.60 per cent. A November increase would mark the fifth hike in seven meetings this year. The figures are stark. Higher rates squeeze household budgets and cut spending.

Markets put the chance of a rate rise at 27 per cent last week. After senior RBA officials spoke at public gatherings, money markets lifted the odds of an increase on Melbourne Cup day next Tuesday to more than 60 per cent. Traders are watching for reactions from senior central bank officials as executives appear at Senate estimates on Wednesday.

In August, the central bank forecast headline inflation of about 3.9 per cent, but the figure reached 4.0 per cent. The RBA now awaits the September-quarter and monthly readings before it finalises its forecast ahead of the policy meeting.

The Bank’s Trade-Off

At the Citi Investment Conference 2026, Hauser said the inflation outlook looked “materially worse” than the August report had projected. He said the RBA still faced a trade-off between a worsening jobs market and rising inflation. Inflation had stayed high for a long time, he said, and some people weren’t sure it would return to target.

RBA chief economist Sarah Hunter described the pressure on the board in an interview on 60 Minutes: “It's really, really tough. It does weigh on us here. It does weigh on the board.” She added, “But we've got to get inflation out for the good of everybody.”

Hunter said higher interest rates pressure household budgets, reduce spending and, over time, cool inflation. Defending the bank’s approach, she said, “There's no painless tool, but this tool does work, and that's why we use it.” The bank’s chosen instrument makes the costs immediate for borrowers, while its intended effect is to slow spending across the economy.

Officials Explain the Pressure

Treasurer Jim Chalmers said during question time that the September-quarter and monthly data were expected to show the war in the Middle East lifting fuel and other prices, with effects felt around the world. He named the United States, Germany, the United Kingdom and France as countries expected to have higher inflation than Australia.

Chalmers said Australia had lower debt, lower interest payments and a stronger economy than almost all its peers. He also acknowledged that overseas developments made domestic inflation challenges harder and added pressure on families and Australians more broadly. Markets, he said, didn’t expect prices to rise as much as in other countries, but inflation wasn’t coming down.

EQ Economics managing director Warren Hogan told News24 the RBA’s leadership had been “relentless” in reinforcing that inflation was too high. He said officials were signalling that interest rates weren’t high enough to control it. Hogan predicted a 25-basis-point increase on Melbourne Cup day, calling it a “slam dunk,” while saying he wouldn’t rule in or out further increases.