Economic & Markets Update — October 2026

Reset Group

5 days ago

5 min read

Updated: 1 day ago

Key takeaway: The Reserve Bank lifted the cash rate to 4.85% on 3 November, its fifth increase this year and the highest rate since late 2008. Inflation is 4.3%, and the RBA now expects it to stay above its 2–3% target band until late 2027. Businesses should plan for higher funding costs for longer, rising input costs led by fuel and energy, and more cautious household spending.

Executive summary

The RBA raised the cash rate by 0.25 percentage points to 4.85% on 3 November. It was the fifth increase this year and took the rate to its highest level since late 2008. Six of the nine Board members voted for the increase and three voted to hold.
Annual CPI inflation rose to 4.3% in September, from 4.0% in August. Trimmed mean inflation, the RBA's preferred underlying measure, rose to 3.6%. Both are above the 2–3% target band.
Unemployment rose to 4.7% in September as employment fell by 39,300 people.
Brent crude is trading near US$115 a barrel, close to a four-year high, as conflict in the Middle East continues. Fuel prices are 23.6% higher than a year ago.
The RBA's new forecasts have headline inflation peaking at 4.5% over the year to December 2026 and not returning to the target band until late 2027, about three quarters later than it expected in August. It expects unemployment to keep rising, to 5.1% by late 2028.

Key indicators

RBA cash rate target: 4.85% from 4 November (previously 4.60%)
CPI inflation: 4.3% over the year to September (4.0% to August)
Trimmed mean inflation: 3.6% over the year to September (3.5% to August, revised)
Unemployment rate: 4.7% in September, seasonally adjusted (4.6% in August)
Real GDP growth: 2.1% over the year to the June quarter (2.5% to the March quarter)
S&P/ASX 200: 8,891.8 at the close on 29 October (8,614.4 on 1 October)
Australian dollar: about US$0.70 on 28 October
Brent crude oil: about US$115 a barrel on 29 October (about US$102 a month earlier)
US federal funds target: 3.75–4.00%, held on 28 October after an increase on 16 September

Australian economy

Growth remains subdued. GDP rose 0.4% in the June quarter and 2.1% over the year, and household consumption grew just 0.4% as households stayed cautious. The September quarter national accounts are due in early December.

Inflation is the larger concern. Prices rose 0.8% in September alone. Housing was the biggest contributor, up 5.2% over the year, with electricity up 12.8% as Commonwealth rebates ended and new dwelling costs up 4.7%. Transport rose 8.7%, driven by a 23.6% rise in fuel. Over the September quarter, CPI rose 1.3% and the quarterly trimmed mean rose 1.0%.

The labour market is loosening. The unemployment rate rose to 4.7% in seasonally adjusted terms, its highest in about five years, while the trend rate held at 4.6%. Participation eased to 66.8%.

Interest rates and monetary policy

The cash rate began 2026 at 3.60%. The RBA raised it in February, March and May to 4.35%, held in June and August, raised it to 4.60% on 29 September, and raised it again on 3 November to 4.85%. The September decision was unanimous. In November, six Board members voted for the increase and three voted to hold.

The Board said underlying inflation remains elevated and broadly based. Higher fuel prices are flowing through to other goods and services, many firms are raising prices or plan to, and it sees a growing risk that higher inflation expectations become embedded. It also judged capacity pressures to be a little tighter than it had thought, even though the economy is slowing, housing prices have fallen and unemployment has risen.

The November Statement on Monetary Policy forecasts headline inflation of 4.5% over the year to December 2026, easing to 3.7% by June 2027 and 2.7% by December 2027. Trimmed mean inflation is forecast at 3.6%, 3.5% and 2.9% at the same points. GDP growth is forecast to slow to 1.3% over 2027, and unemployment to rise to 4.9% by late 2027 and 5.1% by late 2028. The forecasts assume, based on market pricing, that the cash rate stays at about 4.8–4.9% through 2028.

The Board did not rule out further increases. It said it will do what it considers necessary to return inflation sustainably to target and that monetary policy is well placed to respond to developments. The next decision is on 8 December.

For private company groups, the Division 7A benchmark rate for 2026–27 is already fixed at 8.77%. It was set before the income year began and does not move with this year's cash rate decisions.

Financial markets and exchange rates

Shares have been volatile around policy decisions. The S&P/ASX 200 fell 2.0% on 1 October to 8,614.4, its lowest close in four months, as bond yields rose after the RBA's move. It has since recovered to 8,891.8. Banks and property trusts led the gain on 29 October after the US Federal Reserve held rates.

The Australian dollar is trading around US$0.70. It touched about US$0.705 after the September CPI and then eased back. Higher Australian rates are supporting the currency, but a firmer US dollar has limited the gains.

Global developments

The tightening is not confined to Australia. The US Federal Reserve raised its target range in September and held it at 3.75–4.00% on 28 October, with two members voting for a further increase. Its statement said inflation remains elevated, and markets expect another increase in December.

Oil is the main channel to Australia. Brent crude has risen about 12% over the past month and is close to a four-year high. Further disruption would add to fuel, freight and input costs here, while easing tensions would relieve some pressure.

Business implications

Funding costs. Variable-rate facilities have repriced five times this year, by 1.25 percentage points in total. On a $5 million facility, that adds $62,500 a year in interest. Check interest-cover covenants and refinancing dates now, not at the next review.
Cash flow. Fuel, freight and energy costs are rising faster than revenue for many businesses. Since 1 July, superannuation has also been payable each payday rather than quarterly. A 13-week cash flow forecast is worth maintaining.
Pricing. Review whether supply contracts let you pass on cost increases, and whether CPI-linked clauses in leases and contracts will lift your costs. Fixed-price tenders priced earlier in the year deserve a second look.
Investment. Higher rates raise the return a project must earn. Re-test the business case for discretionary capital spending, and expect discounted cash flow valuations to fall as discount rates rise.
Demand. With unemployment rising and households cautious, consumer-facing businesses should watch receivables, stock levels and discounting.
Currency. A dollar near US$0.70 is higher than a year ago. That helps importers but squeezes exporters' margins in Australian dollar terms. Review hedging for large foreign currency commitments.

Looking ahead

19 November 2026: Labour Force, October 2026
25 November 2026: Monthly CPI, October 2026
Early December 2026: National accounts, September quarter
8 December 2026: RBA decision
8–9 December 2026: US Federal Reserve meeting

Sources

Speak with Reset Group. If you would like to test what higher rates and costs mean for your forecasts, funding or valuation, call +61 2 8208 3314 or email info@resetgroup.com.au.

General information only, current at 3 November 2026. It does not take your circumstances into account and is not advice. Liability limited by a scheme approved under Professional Standards Legislation.