Westpac: RBA to Hike Again in November After 4.6% Move

The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.6% on Tuesday, September 29, 2026, a unanimous Monetary Policy Board decision, and Westpac now expects a follow-up increase in November. Westpac chief economist Luci Ellis said the outcome marks a sharp turnaround from the board's August meeting, where an extended hold looked to be the base case. The move was widely expected. Australian inflation data due later today will show how much of the energy shock is reaching consumer prices.

Context — why Westpac now sees another RBA hike

At the 11 August meeting, the data had run against the RBA's hawkish view. Its published forecasts did not support further tightening, and Westpac read the balance of risks as pointing to a prolonged pause. That August stance is the comparable the bank is now measuring the shift against. Two months later, the board can point to some of the upside inflation risks it flagged then.

The post-meeting statement put unusual emphasis on the Middle East conflict, saying global energy prices are well above what the RBA assumed in its August forecasts. Westpac reads this as a signal that the RBA is worried about upside risks to underlying inflation in the fourth quarter as well as the third.

The RBA's liaison program indicates firms are passing on higher costs, or plan to, though the pass-through was described as partial and additional to inflation driven by domestic capacity pressures. The board also flagged construction costs and retail prices of IT goods linked to the AI and data centre boom. Governor Michele Bullock said in the media conference that those risks are building rather than materialising.

For Australian households and businesses, the trigger is a cost shock the RBA cannot offset with domestic policy. Westpac frames the November call as conditional on energy. The bank's base case holds unless there is a lasting resolution of the Middle East conflict or another event that significantly lowers the outlook for energy-related costs.

Data — what the RBA statement changed

The cash rate now sits at 4.6%, up 25 basis points from the prior setting, on a unanimous vote. Westpac describes the bar for a November hike as low and, judging by the rhetoric, treats the move as the base case.

The statement dropped language calling the labour market a little tight, despite that being the message from the Governor and other staff between meetings. It instead described the market as easing broadly as expected. Westpac noted that unemployment has already risen above the RBA's August forecast of 4.5% for the December quarter, and that views on spare capacity clearly differ, pointing to Treasury forecasts that imply more slack.

The board's forward guidance also shifted. It said it will do what it considers necessary to bring inflation sustainably back to target, including raising the cash rate further if needed. That is a change from the earlier condition that upside risks must materialise, and a return to the tone of the June meeting.

Element	August meeting	September 29 decision
Cash rate	Prior setting	4.6%
Labour market wording	A little tight	Easing broadly as expected
Hike condition	Upside risks must materialise	Raise further if needed

For context, the RBA's own August forecast had unemployment at 4.5% for the December quarter; the jobless rate is already above that level. Westpac also points to Treasury forecasts implying more spare capacity than the RBA assumes. The disagreement over slack is the core of the split between the bank's November call and the case for holding.

Analysis — what a November RBA hike means for markets

The unanimous vote suggests any doubts among external board members about the RBA's downbeat view of supply capacity were outweighed by resurgent oil prices and stronger than expected inflation and growth data. That unanimity matters for how the market prices the November meeting: a dissent would have signalled a genuine split, and there was none.

Second-order effects run through energy-exposed sectors first. Westpac's read is that firms are passing on higher costs only partially, which means margin pressure sits with businesses that cannot fully reprice. Construction and AI-linked IT retail prices are on the RBA's watch list, so those categories carry the most policy sensitivity. Australian rate-sensitive assets carry the most direct exposure to a November move, since a follow-up hike would extend the tightening cycle rather than end it.

The counter-argument is the labour market. Unemployment is already above the RBA's August forecast, and Treasury forecasts imply more slack than the RBA sees. If that slack is real, the inflation impulse from wages is weaker than the board assumes, and the November hike does not arrive. Westpac acknowledges the differing views on spare capacity without resolving them.

On positioning, the debate is shifting from whether the RBA tightens again to when it stops. Westpac sees a much higher bar for hikes beyond November, given the cumulative rise in rates, the easing labour market and an expected further weakening in housing. Traders positioned for a longer tightening cycle face that asymmetry: a low bar for November, a high bar after it. Australian inflation data due later today is the next input into whether the energy shock is broad enough to justify the follow-up.

Outlook — what to watch next

The November RBA meeting is the immediate catalyst, and Westpac's base case rests on energy prices and the Middle East conflict. A lasting resolution of that conflict, or another event that significantly cuts energy-related costs, is the stated condition that would change the call. Australian inflation data due later today is the nearer test of how much of the energy shock is filtering into prices.

Beyond November, the bank sees a much higher bar for further hikes. The cumulative rise in rates, the easing labour market and an expected further weakening in housing are the reasons. Softer housing and labour data are the main counterweights to the hawkish tone, and they define what would flip the November call.

Investors watching Australian rates should track the inflation print, the energy complex and the unemployment path. No specific levels are given in the report; the conditionals are the guide.

Frequently Asked Questions

Why does Westpac expect an RBA hike in November?

Westpac chief economist Luci Ellis said the bank's base case is a November increase because the RBA's post-meeting statement emphasised that global energy prices are well above what it assumed in August. The bar for a November hike is low, and the rhetoric points to it, unless a lasting resolution of the Middle East conflict or another event significantly lowers the outlook for energy-related costs. The unanimous September vote reinforces the signal.

What could stop the RBA from hiking again in November?

Westpac's stated condition is a lasting resolution of the Middle East conflict or another event that significantly cuts energy-related costs. Softer labour market and housing signals are the main counterweights. Unemployment has already risen above the RBA's August forecast of 4.5% for the December quarter, and Treasury forecasts imply more spare capacity than the RBA assumes, which would weaken the case for further tightening.

What does the RBA statement change for Australian borrowers?

The cash rate is now 4.6% after a unanimous 25 basis point increase. The statement dropped the condition that upside risks must materialise before further hikes, and said the RBA will raise the cash rate further if needed. For borrowers, that means the tightening cycle may not be finished, and Westpac sees only a much higher bar for hikes beyond November.

Bottom Line

Westpac's November RBA hike call hinges on energy prices holding the Middle East conflict unresolved.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.