Interest Rates: The RBA's Balancing Act
The Reserve Bank of Australia held the cash rate at 4.35% in August, but the pause hasn’t signalled the end of the story. Annual inflation eased to 3.5% in the twelve months to July, down from 3.8% in June, yet the trimmed mean measure the RBA watches most closely stayed steady at 3.6%, still above the Bank’s 2–3% target band. Governor Michele Bullock has kept the door open to a further rate rise, and heading into the Board’s 29 September meeting, the major banks were split: NAB pencilled in a hike this month, while ANZ, CBA and Westpac leaned toward a move in November. All four now agree a rate rise is likely before year’s end.
For households, this means it’s worth reviewing your loan structure now rather than waiting for the next headline. A fixed, variable or split home loan may suit your circumstances differently depending on how the cash rate moves, and for savers, term deposit and high-interest savings rates should keep tracking any RBA moves, though not always straight away.
Global Markets: The US Federal Reserve Changes Course
Offshore, the US Federal Reserve raised its benchmark rate by 0.25 percentage points to a range of 3.75%–4.00% on 16 September, its first increase since 2023. The move, delivered under new Fed Chair Kevin Warsh, followed stronger-than-expected US inflation data and reflects a broader shift toward a more cautious, inflation-focused stance among the world’s major central banks. Future markets are pricing in a reasonable chance of at least one more US rate rise before the year is out.
This matters for Australians because US monetary policy influences global borrowing costs, currency movements and investor sentiment, including here at home. Higher US rates have contributed to elevated global bond yields and some choppiness in share markets through September, as investors reassess how much further central banks, including our own, may need to go.
The Australian Share Market: A Volatile but Resilient Run
The ASX 200 touched a record high above 9,290 points in early August before pulling back to trade closer to the 8,700–8,900 range through September, as higher bond yields, energy price swings and rate uncertainty weighed on sentiment. Bank stocks have softened, while gold miners and select resources names have benefited from investors seeking safer havens amid the uncertainty. This kind of pullback after a record run is a normal part of market cycles rather than a cause for alarm, and it’s a timely reminder of why diversification across sectors and asset classes remains one of the simplest ways to manage risk.
The Australian Dollar and Cost of Living
The Australian dollar has traded in a relatively narrow band against the US dollar, caught between the prospect of further RBA rate rises, which typically support the currency, and a resurgent US dollar following the Fed’s hawkish turn. A stronger AUD can ease imported inflation and make overseas travel more affordable, while a weaker AUD tends to support export earnings. Either way, currency swings are worth watching if you hold international investments or are planning travel later in the year.
What This Could Mean for You, Whatever Stage You're At
- Homeowners and borrowers: Revisit your budget and loan structure now, rather than after the next rate decision. A mortgage broker or adviser can help you stress-test your repayments against a further rate rise.
- Savers and retirees: Term deposits and high-interest accounts remain competitive while rates stay elevated. It’s worth comparing offers rather than assuming your current rate is still the best available.
- Superannuation members: Short-term market swings are a normal feature of long-term investing. Your super is generally invested for decades, so it’s the overall strategy and diversification that matter most, not any single month’s headlines.
- First-time investors: Periods of volatility can feel unsettling, but they also underline the value of a clear plan, a diversified portfolio and a long-term mindset over trying to time the market.
Looking Ahead to November
Between now and late November, keep an eye on the RBA’s 29 September and 4 November meetings, further US inflation and employment data, and any developments in global energy markets, which continue to influence both inflation and investor sentiment worldwide. None of these events call for panic, but they are worth understanding so you can make informed decisions rather than reactive ones.
This article is general information only. It doesn’t take into account your personal objectives, financial situation or needs, and shouldn’t be relied on as personal financial advice. Market conditions can change quickly, so figures were accurate as at the time of writing. If you’d like to understand how these developments might affect your specific situation, please get in touch with our team for tailored advice.
