The RBA sets the cash rate based on six key indicators: CPI inflation, core inflation, unemployment, GDP growth, home prices, and wage growth. These metrics most directly signal the likely direction for rates. The Board also weighs global conditions, household debt, and financial stability, but the six core measures drive most decisions.
Economic Highlights
- Inflation eased to 3.8% - still above the RBA's 2-3% target
- Unemployment rose to 4.4% from 4.1% as growth stayed weak
- House prices climbed to $1.111m from $1.008m, keeping pressure on buyers
Inflation (CPI)
Consumer Price Index measuring changes in the cost of living. Both headline and core (trimmed mean) inflation are measured monthly, comparing to the same month last year.
Headline Inflation (YoY)
6 Months Ago
Core Inflation - Trimmed Mean (YoY)
6 Months Ago
Headline Inflation Trend (Monthly)
💡Expert Insights
Key Takeaway
Inflation is moving in the right direction, but it is still above the RBA target band, so rate cuts are not a sure thing yet.
What's Happening
Headline inflation was 3.8% in June 2026, down from 4.6% in March and 4.2% six months ago. It was also higher than 3.4% a year ago. Monthly prices fell 0.1% in June after a 0.7% drop in May, so inflation is still easing.
Impact on Borrowing
At 3.8%, inflation is still above the RBA’s 2-3% target range, so the RBA may stay cautious. That keeps pressure on borrowing costs, even though the recent easing reduces the need for tighter settings.
Unemployment Rate
The share of Australians who want work and are looking for a job, but do not have one.
Current Value
Quarterly Change
fell to a lower level
Same Time Last Year
May 2025
💡Expert Insights
Key Takeaway
The labour market is still holding up, with unemployment close to its recent range rather than moving sharply up or down.
What's Happening
The unemployment rate was 4.4% in May 2026, down from 4.5% in April and up from 4.3% in March. It is sitting at the same level as a year ago and six months ago.
Impact on Borrowing
A rate around 4.4% is fairly steady, so it gives the RBA little new reason to cut rates quickly. Borrowing costs may stay sensitive to inflation, not just jobs data.
GDP Growth
GDP growth measures how much the Australian economy is growing over time. It shows whether the total amount of goods and services being produced is rising or slowing.
Current Value
Quarterly Change
Growth rate for this period
Same Time Last Year
2025-Q1
💡Expert Insights
Key Takeaway
Growth is running below the RBA's 2-3% inflation target range, which signals the economy is still struggling to build strong momentum.
What's Happening
GDP growth is very soft at 0.3% in 2026-Q1, down from 0.9% in 2025-Q4 and 1.0% in 2025-Q2. It is sitting at the same level as a year ago and just below where it was six months ago.
Impact on Borrowing
Weak growth can give the RBA more room to keep rates on hold or cut them if inflation is under control. For borrowers, that can mean less pressure on mortgage and business loan costs over time.
Home Prices
The average price of houses across Australia, based on ABS data. It gives a simple snapshot of what homes are costing.
Current Value
Quarterly Change
rose by 2.0%
Same Time Last Year
2025-Q1
💡Expert Insights
Key Takeaway
Mean house prices are still climbing at a solid pace, sitting well above a year ago and above the RBA’s 2-3% inflation target benchmark.
What's Happening
Mean house prices rose to $1,111 in 2026-Q1, up from $1,089 last quarter and $1,051 six months ago. That is also up from $982 a year ago.
Impact on Borrowing
Rising house prices can keep housing-related inflation firm, which may make the RBA less comfortable cutting rates quickly. Higher prices also make buying and borrowing more expensive for Australians.
Wage Growth
Wage growth measures how fast workers' pay is rising over time, compared with the same quarter a year earlier.
Current Value
Quarterly Change
fell to a lower level
Same Time Last Year
2025-Q1
💡Expert Insights
Key Takeaway
Pay rises are still solid, but they have cooled from a year ago and are moving in a tighter range around 3.3%-3.4%.
What's Happening
Wage growth was 3.3% in 2026-Q1, down from 3.4% in 2025-Q4 and back to the same level as 2025-Q3. It is well below 4.1% a year ago.
Impact on Borrowing
With wage growth still above the RBA's 2-3% inflation target, it can keep some pressure on rates and borrowing costs, but the latest reading looks a bit calmer than last year.
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Frequently Asked Questions
The RBA primarily uses six indicators: CPI inflation, core inflation (trimmed mean), unemployment rate, GDP growth, home prices, and wage growth.
