How high will Australian interest rates go in 2026?

The RBA's own internal modelling assumes the cash rate reaches approximately 4.7% by end-2026, based on market pricing at the time of the May Statement on Monetary Policy. Westpac forecasts a peak of 4.85% via two hikes in August and September 2026. CBA forecasts the peak has already been reached at 4.35%. The CAMA Shadow Board gives a 70% probability that rates need to go higher over the next six months from the May meeting.

What is the CAMA Shadow Board and why does it matter?

The CAMA RBA Shadow Board is an independent panel of leading Australian macroeconomists who issue their own assessment of what the appropriate RBA decision should be at each meeting. Their recommendations are not binding but provide a credible independent read on where expert opinion sits. At the May 2026 meeting, the Shadow Board put a 70% probability on rates needing to go higher in the next six months — more hawkish than most bank forecasters.

What happens to the property market if rates go to 4.85%?

If Westpac's 4.85% peak scenario plays out, mortgage repayments on a $600,000 loan would be approximately $541/month higher than they were in January 2026 before the rate cycle began. This would represent a significant further deterioration in housing affordability and almost certainly push national auction clearance rates, already at 52%, further below 50%. Inner-city apartment markets with high investor concentration would be most exposed.

Should I fix my home loan rate before the June RBA decision?

Fixed rates already incorporate market expectations of future rate moves — they are not a way to get ahead of an RBA decision. If Westpac's 4.85% scenario is priced in, some fixed rates will already be elevated. If the RBA surprises with a hold-then-cut path, fixed rates could be higher than where variable rates end up. A split loan (part fixed, part variable) is a common hedge in uncertain environments. A broker can run the numbers for your loan size and determine the break-even point where fixing becomes worthwhile.

What is the argument for the RBA hiking in June 2026?

The hawkish case rests on three points: (1) Inflation remains stubbornly above target, with trimmed mean at 3.4% as of April 2026, well above the 3% ceiling. (2) The labour market, while softening, remains tight with unemployment at 4.3%, supporting wage growth above target-compatible levels. (3) The Middle East conflict continues to create energy price uncertainty, and the RBA has flagged upside inflation risk from second-round fuel price pass-through. Proponents argue waiting risks inflation expectations de-anchoring.

RBA AnalysisInterest RatesJune 16 Decision

RBA June 2026: Hold or Hike? The Economist Debate Splitting Australia's Top Forecasters

Q: Will the RBA hike rates at the June 2026 meeting?

The majority view among economists is a hold at 4.35%. A Reuters poll of 31 economists found 18 expect no change in June. However, a significant minority expects at least one more hike, and market pricing implies approximately 30-35% probability of a June hike to 4.60%. Westpac, the only major bank forecasting further hikes, revised its June call to August in early May, suggesting the June meeting is likely to result in a hold.

The June 16 RBA meeting is shaping up as the most contested of this rate cycle. A Reuters poll of 31 economists found 18 expect a hold at 4.35% — but more than a third are calling for at least one more hike. Westpac is demanding the RBA move again, forecasting a 4.85% peak via August and September hikes. The CAMA Shadow Board puts a 70% probability on rates needing to go higher. Here is the full case for both sides and what it means if you have a mortgage.

Raj Bhangu

Principal Mortgage Broker, iSmart Finance Group

27 May 2026 · 9 min read

Will the RBA hike rates in June 2026?

The consensus is a hold at 4.35%. A Reuters poll of 31 economists found 18 expect no change in June. Westpac is the only major bank forecasting further hikes, having revised its June call to August, forecasting two more hikes (August and September) to a peak of 4.85%. The CAMA Shadow Board gives a 70% probability that rates need to go higher over the next six months. Market pricing implies approximately 30-35% probability of a June hike. The decisive factor will be April's monthly CPI data (released today, showing trimmed mean at 3.4%), labour force data due June 5, and any further energy price developments before the June 16 decision.

Key Takeaways

118 of 31 economists (58%) forecast the RBA holds at 4.35% at the June 16 meeting.
2Westpac revised its forecast in May: two more hikes in August and September, not June, to a peak of 4.85%.
3CAMA Shadow Board: 70% probability that rates need to go higher in the next six months.
4Market pricing implies approximately 60 basis points of additional hikes by end-2026 (peak ~4.95%).
5April CPI trimmed mean at 3.4% — first month-on-month easing — reduces but does not eliminate the case for June action.
6The June quarter CPI (due late July) is the most important data point for the August 11 decision.

Where the Forecasters Stand

The division among economists heading into the June 16 RBA meeting is sharper than at any point in this rate cycle. A Reuters survey of 31 economists produced the following split: 18 expect the cash rate to hold at 4.35% through the rest of 2026. More than one-third expect at least one further hike, with the most hawkish forecasters calling for two moves taking the rate to 4.85% or higher.

Among the major banks, CBA is the clearest hold advocate, with head of Australian economics Belinda Allen stating the three hikes since February have positioned policy as "slightly more restrictive" and that the Board has room to pause. Westpac, the standout dissenter, revised its rate call in early May — originally expecting a June hike, it pushed the first of two additional moves to August, citing the need for the June quarter CPI to confirm the inflation trajectory before moving again.

Reuters Survey: 31 Economist Forecasts for RBA Rate Path in 2026

Green = hold at 4.35% (58%). Amber = one more hike to 4.60% (26%). Red = two or more hikes to 4.85%+ (16%). The consensus favours a hold, but the hawkish minority is significant.

Source: Reuters poll of 31 economists, May 2026. CAMA Shadow Board separately puts 70% probability on rates needing to go higher in the next 6 months.

CBA

Hold at 4.35%

Policy now "slightly more restrictive". Room to pause. Cuts to begin 2027.

Westpac

Aug + Sep hikes

Two more 0.25% hikes to 4.85% peak. June now a hold, but August viewed as live.

NAB / ANZ

Hold with upside risk

Base case hold, but acknowledge upside inflation risk could force further action.

The Case FOR Hiking Again: Why the Hawks Are Not Fringe

The hawkish argument is built on three pillars that are difficult to dismiss, even for those who prefer a pause.

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Inflation is still well above target

Trimmed mean inflation at 3.4% (April monthly) is 0.4 percentage points above the 3% target ceiling. The quarterly measure from the March 2026 quarter was 3.5%. The RBA's own Statement on Monetary Policy forecasts underlying inflation to remain above 3% until mid-2027. Hawks argue that allowing 18 months of above-target inflation to persist risks embedding it into wage and price-setting behaviour.

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The labour market is resilient

Unemployment at 4.3% in March 2026, while slightly higher than a year ago, remains historically low. A tight labour market supports wage growth above the levels compatible with the inflation target. The RBA needs to see employment soften more materially before it can be confident that demand-side inflation pressure is truly easing.

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Second-round fuel price effects are faster than expected

The Middle East conflict and Strait of Hormuz disruptions drove a surge in global fuel prices through March 2026. Westpac's chief concern is the "surprisingly rapid pass-through" of higher fuel costs into broader goods and services prices — a second-round effect the RBA previously expected to be slower. If fuel prices remain elevated or rise again, the June quarter CPI could exceed expectations.

The Case FOR Holding: Why the Doves Have the Numbers

The 18 economists forecasting a hold are not ignoring the inflation data — they are making a different judgement about the balance of risks and the transmission lags of monetary policy.

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Three hikes in three months needs time to transmit

The full economic impact of rate hikes takes 12-18 months to flow through the economy. The February hike has been in the system for only 3 months. The May hike only 3 weeks. Hiking again before the existing tightening has fully transmitted risks overshooting — pushing the economy into unnecessary weakness.

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GDP growth is already slowing sharply

The RBA's own forecasts show GDP growth at just 1.9% for 2026 and 1.3-1.4% thereafter. Consumer spending is weakening, property market clearance rates have fallen to 52%, and the federal budget's property tax changes have added a structural headwind. The economy is absorbing significant simultaneous shocks. Further tightening adds to the risk of a hard landing.

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April CPI shows the first crack in inflation momentum

Today's April monthly CPI indicator, the first to show a seasonally adjusted monthly decline this cycle, provides the earliest signal that the tightening is working. A hold in June allows the Board to observe whether April is the beginning of a genuine downtrend or a one-month fuel price blip. Hawks are asking the Board to act before that information is available.

Three Rate Paths and What Each Means for Borrowers

The chart below shows three cash rate scenarios from now through end-2027. The spread between the CBA hold scenario (peak already reached at 4.35%) and Westpac's 4.85% peak is 0.50 percentage points — which translates to approximately $150-$300 per month in additional mortgage repayments depending on loan size.

RBA Cash Rate Scenarios: Hold vs Westpac Two-Hike vs Market Pricing

Green dashed = CBA hold at 4.35% then cuts. Red = Westpac 4.85% peak (August + September hikes). Amber = market pricing (~4.70% peak). All three scenarios eventually show cuts in 2027.

Source: CBA Economics, Westpac IQ, RBA SMP May 2026 (market-implied path). Scenarios are not guaranteed outcomes.

Monthly Repayments by Scenario: What Two More Hikes Would Cost

Estimates based on 25-year P&I loan at prevailing SVR. Each 0.25% hike adds approximately $83-207/month depending on loan size. If Westpac's 4.85% peak is reached, $600k borrowers would pay $250/month more than today.

SVR assumptions: 8.90% (current), 9.15% (one hike), 9.40% (two hikes). Individual rates vary by lender, LVR, and discount margin.

The Auction Market Is Already Pricing In Rate Anxiety

Whatever the RBA does on June 16, the property market is already showing the strain. The national auction clearance rate fell to 52.2% for the week of May 23, with Brisbane at just 20.1%. Wet weather affected the May 24-25 weekend, with volumes lower than usual and preliminary clearance rates likely to show further softness.

The correlation between clearance rates and rate expectations is real but lagged. What is happening in auction markets today reflects the three hikes already delivered plus the investor withdrawal following the 12 May budget changes. If Westpac's two additional hikes materialise, the clearance rate impact would likely flow through in Q3 2026, pushing already-soft markets into more pronounced buyer territory.

What a June 16 hike vs hold means for property

If the RBA holds (likely)

+Clearance rates likely stabilise near current levels
+Fixed rates may ease slightly on a hold signal
+Buyer confidence gets a modest lift
!Property prices still under structural headwinds from budget

If the RBA hikes (minority case)

-Clearance rates likely drop toward 48-50% nationally
-Further investor withdrawal from established property
-Additional $83-156/month on variable repayments
!First home buyers may find even less competition at auction

What Borrowers Should Do Now, Before the Decision

In an environment where even the economists disagree by 0.50 percentage points on peak rates, the right strategy for most borrowers is to focus on what they can control rather than waiting for certainty that will not come before June 16.

Review your current rate against the market

The average variable borrower is paying 0.5-1.0% above the sharpest competitive rates available. At $600,000, a 0.75% reduction saves approximately $280/month. This saving exists regardless of what the RBA does next.

Consider a split loan if you are anxious about further hikes

Fixing 50% of your loan provides certainty on half your repayments while leaving the other half to benefit from eventual rate cuts. Most lenders offer split facilities at no extra cost. A broker can model the break-even point where fixing becomes worthwhile for your loan size.

Stress-test your budget at 4.85%

Even if your bank does not require it, run your own budget at a cash rate of 4.85% — Westpac's worst-case forecast. If you can manage at that level, you can manage anything the RBA is likely to deliver this cycle. If not, it is better to know and plan now than to be caught out.

Do not fix to avoid a single meeting outcome

Fixed rates already price in expected future moves. If the market has 35% probability of a June hike priced in, a 3-year fixed rate will reflect that. You are not "getting ahead" of the RBA by fixing — you are paying for the optionality markets have already valued.

Frequently Asked Questions

The majority of economists (18 of 31 in a Reuters survey) expect the RBA to hold the cash rate at 4.35%. Westpac, the major outlier, revised its June hike call to August in early May. April CPI data released today showing trimmed mean at 3.4% marginally reduces the case for an immediate June move. Market pricing implies approximately 30-35% probability of a June hike.

Forecasts range from the current 4.35% (CBA base case — no further hikes) to 4.85% (Westpac, two more hikes in August and September). Market pricing implies approximately 4.70-4.95% by year-end. The RBA's own internal modelling from May assumes a year-end rate of approximately 4.7%.

Under the Westpac two-hike scenario (to 4.85%), a $600,000 mortgage would cost approximately $250/month more than today. Combined with the three hikes already delivered since February 2026, total repayment increases since the start of this cycle would reach $625/month on a $600k loan. Under the CBA hold scenario, no further increases occur.

Westpac cites two specific factors: the longer-than-expected disruption to fuel supply from Middle East conflict, and the unusually rapid pass-through of higher fuel costs into broader goods and services prices in Australia — faster than the RBA initially modelled. Westpac's economists argue these second-round effects require a more assertive policy response to prevent inflation expectations from de-anchoring.

Raj Bhangu

Principal Mortgage Broker, iSmart Finance Group

Licensed Mortgage BrokerCredit Representative 481761FBAA Member

Raj Bhangu helps Australian borrowers navigate rate cycles with practical, data-driven guidance. He monitors RBA decisions, bank rate changes, and market pricing to give clients timely advice on refinancing, fixing, and managing their mortgage through uncertain conditions.

Sources & References

This article references information from the following authoritative sources:

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