The Reserve Bank meets in two weeks, and the consensus view has shifted: no move at the 28–29 September board meeting, but a hawkish tone that leaves the door open for a hike once quarterly inflation data arrives on 28 October.
That’s the backdrop as one of the major banks lifted its year-end growth forecast from 1.0% to 1.5%, citing a steadier-than-expected economic pulse in the face of higher rates and global energy shocks. The upgrade follows national accounts data showing household spending holding up and a surge in data centre investment offsetting weakness elsewhere.
For property buyers and investors, the practical question is narrower: does a modest growth upgrade make a rate rise more or less likely, and what does that do to borrowing costs over the next six months?
What the upgraded forecast actually signals
The headline number, 1.5% growth by year-end, up from 1.0%, sounds like momentum, but the context matters. A leading indicator tracking economic activity three to nine months ahead ticked up slightly in August, moving from –0.17% to –0.09% on a six-month annualised basis. That’s still a negative reading, just less negative than before.
The improvement reflects two specific supports: household resilience (savings buffers and employment stability keeping consumption from collapsing) and a sharp ramp-up in infrastructure spending, particularly data centres. On the other side, labour markets, commodity prices, and consumer sentiment have collectively dragged growth expectations lower since February, with early signs that established housing market weakness is starting to feed through.
The net result is an economy that’s neither stalling nor accelerating, it’s grinding along at a slow pace, with enough fragility that one more rate rise could tip sentiment further.
Why September is likely a hold
The RBA’s next full quarterly inflation update doesn’t land until 28 October, which means the September board meeting will be working off monthly data and incomplete signals. That’s not typically the environment in which the central bank pulls the trigger on a rate rise, especially when the economy is showing mixed signals rather than clear overheating.
What’s more likely: a statement that reinforces the possibility of further tightening without committing to it, what market watchers are calling a “very hawkish hold.” That leaves the door open for a move in November if the October inflation data shows sticky price growth, particularly in services and non-tradables.
For borrowers, that means another six to eight weeks of uncertainty. Fixed rates are already pricing in at least one more hike, so anyone locking in now is paying for that risk whether it materialises or not.
The pressure points
Three areas are worth watching between now and the October inflation update:
- Fuel prices: petrol has climbed again in recent weeks, which feeds directly into household budgets and inflation expectations. If that continues, it complicates the RBA’s calculus even if underlying inflation is moderating.
- Consumer sentiment: early data suggests households are pulling back again, likely in response to the renewed rate-rise chatter. If sentiment deteriorates sharply, that could weaken the case for further tightening.
- Established housing markets: auction clearance rates and days on market are showing early signs of stress in some capital city markets. If that accelerates, it becomes a self-reinforcing loop, weaker prices → tighter credit → softer demand → weaker prices.
Key numbers
- Growth forecast upgraded from 1.0% to 1.5% for year-end
- Leading indicator reading: –0.09% in August, up from –0.17% in July
- Next RBA board meeting: 28–29 September
- Quarterly inflation update: 28 October
- Consensus view: at least one more rate rise before end of 2025
What this means for borrowing decisions
If you’re refinancing or taking out a new loan in the next eight weeks, the risk skew is toward higher rates, not lower. The RBA isn’t cutting before mid-2026 at the earliest, and the probability of one more hike before year-end is still above 50%.
That shifts the serviceability calculus. If you’re borrowing at the edge of your buffer, model the repayment impact of a 25-basis-point rise and make sure you can still meet the stress test at 3% above the actual rate. If that’s tight, consider whether waiting until October gives you more certainty, or whether locking in now at least removes the decision fatigue.
For investors, the yield equation is getting harder. Rental growth is slowing in most markets, vacancy is ticking up in pockets of oversupply, and another rate rise would compress cashflow further. If you’re buying for capital growth, you’re betting that the RBA pivots to cuts by mid-2026 and that prices respond quickly, that’s possible, but it’s not the base case.
What would change the outlook
Two scenarios could derail the hawkish hold into hike sequence:
- Sharp deterioration in employment data: if unemployment jumps or underemployment spikes, the RBA would likely abandon further tightening and shift to a neutral hold. That’s not priced in yet, and labour market data so far has been resilient.
- Global shock: a recession in major trading partners, a sharp drop in commodity prices, or a financial market dislocation would force the RBA’s hand. Those are tail risks, not base case, but they’re worth monitoring.
On the flip side, if the October inflation print comes in hotter than expected, particularly in housing, insurance, and services, the case for a November hike strengthens considerably, and markets would reprice quickly.
For more on how the RBA’s last decision played out, see Westpac RBA forecast holds as big banks flip to November hike and Interest rate hike threat escalates as GDP surprise exposes inflation gap.
Where to focus next
If you’re making a borrowing decision in the next month, start with the October inflation release. That’s the data point that will decide whether the RBA moves in November or holds into 2026. Between now and then, track fuel prices, consumer sentiment updates, and auction clearance rates, those are the early warning signals that could shift the narrative faster than official data.
If you’re already locked into a variable rate, the practical move is to model the cashflow impact of a 25-basis-point rise and make sure your buffer is real, not theoretical. If it’s tight, consider whether an offset account or a partial rate lock gives you more breathing room.
For weekly analysis on rates, inflation, and what the RBA is really watching, subscribe to the Australian Property Review newsletter.
General info, not financial advice.
