The Monetary Policy Board of the central bank has revealed its final cash rate decision of the year.
The Reserve Bank of Australia (RBA) has announced that the official cash rate will remain on hold for the next couple of months, after keeping it steady at 3.60 per cent for December/January.
This marks the third consecutive month where the cash rate has not moved, and the first time in a year that the settings have been kept level for more than two rate decisions (the last time being in 2024 - when the cash rate was held at 4.35 per cent for the whole year).
Today’s policy decision was unanimous.
The statement from the RBA on its monetary policy decision reads: "The recent data suggest the risks to inflation have tilted to the upside, but it will take a little longer to assess the persistence of inflationary pressures. Private demand is recovering. Labour market conditions still appear a little tight but further modest easing is expected. The Board therefore judged that it was appropriate to remain cautious, updating its view of the outlook as the data evolve.
"The board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market. The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome."
The decision to hold the cash rate was widely anticipated, with all four major bank economists and 97 per cent of the market having forecast no movement from the central bank this month.
Commentators flagged the fact that there have been persistent inflation pressures, a balanced (not tight) labour market, and steady GDP growth, which they believed would stay the RBA’s hand.
Moreover, economists have noted that the cash rate has fallen by 75 basis points (bps) this year - and marked the first easing cycle for five years.
Commenting ahead of the meeting, CEO of aggregation group Finsure, Simon Bednar, said he believed there was “absolute zero chance of a move by the RBA at this month’s meeting”.
“The best news for mortgage customers next year could be the RBA keeping official rates in an extended holding pattern,” he said, but noted that there are also “headwinds into 2026” that mean it would be “questionable if we’ll see any relief in the near future”.
Reacting to the decision, the CEO of the Mortgage & Finance Association of Australia (MFAA), Anja Pannek, said the hold had been "widely tipped across the economist community", with analysts pointing to higher-than-expected inflation.
“Annual CPI ticked up to 3.8 per cent in October. Economists are warning that services inflation remains sticky, household spending is running hotter than expected, and the RBA is wary about moving prematurely.”
Pannek said borrowers hoping for a pre-Christmas rate cut would be disappointed, but added: "A rate hold doesn't mean a borrower should sit still," suggesting that brokers were "expertly placed" to help clients reprice and "explore alternatives".
“In a market shaped by rate policy, expanded first home buyer schemes, tight supply and high investor engagement, having expert home loan support is more important than ever.,"she said.
"With brokers remaining the channel of choice for Australian home buyers, with 77.3 per cent market share, this underscores just how vital broker assistance is for households making major financial decisions.”
Aggregator heads have also responded, Mark Haron, executive director at Connective, commented: “The hold today offers a degree of stability heading into 2026, but it does not change the ‘higher for longer’ rate environment. Inflation remains sticky, and the RBA has not seen enough progress to shift its stance.”
Haron noted that borrowers’ circumstances are becoming increasingly mixed (with some comfortable while many are under pressure and waiting for relief), mortgage stress is still above pre-hike conditions, the labour market is” softening without weakening materially”, while a firm housing market continues to add to affordability pressures and servicing remains tight.
“Broker support remains critical for the coming months. The focus should be on proactive follow up on pre-approvals, scenario planning and helping clients assess whether rising property values create opportunities to restructure or upgrade,” Haron said.
Mortgage Choice CEO Anthony Waldron also said he believed the RBA kept rates on hold in “reaction to stickier-than-expected inflation”.
“The October CPI data showed that the cost of goods and services continues to rise faster than the RBA’s target of 2–3%. Until inflation is firmly back in that target range, the RBA cannot responsibly lower interest rates,” he said.
However, Waldron noted that if the labour market remains strong, it may “give the RBA confidence that the interest rates can stay higher for longer”.
“For those looking to buy their first home or upgrade to their next, the cash rate staying on hold creates a window of stability,” Waldron continued.
“My advice to borrowers is to look at the factors you can control. You can’t control change the cash rate, but you do have control over your home loan,” suggesting that now was “the perfect time” to talk to their mortgage broker and review whether their home loan is competitive.
2025: The year of changing forecasts
The calendar year 2025 has seen three rate cuts - one 25 bp reduction in February 2025 (which marked the first rate cut since November 2020), one in May and another in August.
However, this rate-easing cycle has been shallower than initially forecast, with economists having tweaked their forecasts repeatedly over the year. For example, US tariffs in April had led some to forecast that the May rate decision may have been a 50 bps cut, and several major banks had expected the central bank to reduce the cash rate in July (but the bank surprised many by holding rates steady).
Expectations were that the terminal cash rate for this easing cycle would be between 3.1 and 3.35 per cent. However, in September of this year, several lenders - including the Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB) - pushed out their expectations for when the next rate cut would be, with many saying at the time that the next rate cut would not be until mid 2026.
Since then, three of the four major banks (excluding Westpac) have suggested that we will not see any more rate cuts this cycle, with ANZ joining CBA and NAB last week in suggesting that inflationary pressure means another rate cut is not likely.
Such is the change in economic forecasting, that some economists are now suggesting the next rate movement will be a rate hike - and could come as early as the next rate decision (in February 2026).
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