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 up to 4.3% - still above the RBA's 2-3% target band
- Unemployment rises to 4.7% - labour market is softening
- GDP growth up to 0.4% - but household demand remains weak
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
The recent lift in both yearly and monthly inflation points to firmer price pressure, not a clean move back to target yet.
What's Happening
Headline inflation is at 4.3%, up from 3.5% six months ago and above 3.7% a year ago. It also jumped from 4.0% in August to 4.3% in September, with the monthly rise easing only a little from 0.8% after 0.4% the month before.
Impact on Borrowing
At 4.3%, inflation is still above the RBA’s 2-3% target, so the Bank may stay cautious on rate cuts. That keeps borrowing costs for mortgages and other loans under pressure.
Unemployment Rate
The share of Australians in the labour force who do not have a job but are actively looking for one.
Current Value
Quarterly Change
rose to a higher level
Same Time Last Year
September 2025
💡Expert Insights
Key Takeaway
Unemployment is edging up, which points to a labour market that is cooling a bit after sitting below 4.5% earlier this year.
What's Happening
The unemployment rate is 4.7% in 2026-09, up from 4.4% in 2026-06 and 4.5% six months ago. It is also higher than 4.3% a year ago, and unchanged from 2026-08.
Impact on Borrowing
A higher unemployment rate can ease pressure on the RBA to lift rates, since softer labour market conditions usually slow wage and inflation pressure. If it keeps rising, borrowing costs may face less upward pressure.
GDP Growth
GDP growth shows how much the Australian economy is expanding or shrinking over time. It is the broadest measure of economic activity across households, businesses and government.
Current Value
Quarterly Change
Growth rate for this period
Same Time Last Year
2025-Q2
💡Expert Insights
Key Takeaway
The economy is still growing, but only slowly. A 0.4% pace points to soft demand, so household spending and business activity are not running hot.
What's Happening
GDP growth is running at 0.4% in 2026-Q2, up from 0.3% in 2026-Q1 but down from 0.9% six months ago. It is also slightly higher than 0.3% a year earlier.
Impact on Borrowing
With growth still weak and sitting well below the RBA’s 2-3% inflation target benchmark, the RBA has room to keep rates steady or lower them if needed. That keeps borrowing costs from rising.
Home Prices
The average price of houses sold across Australia. It gives a rough guide to how expensive the housing market is.
Current Value
Quarterly Change
fell by 0.7%
Same Time Last Year
2025-Q2
💡Expert Insights
Key Takeaway
House prices are still rising on a yearly basis, so housing remains a pressure point even with a small quarterly dip.
What's Happening
Mean house prices were $1,100 in 2026-Q2, down slightly from $1,109 in 2026-Q1, but up from $1,093 six months ago and well above $983 a year ago.
Impact on Borrowing
Higher house prices can add to inflation pressure and keep the RBA cautious, which can leave borrowing costs higher for longer if the broader economy stays strong.
Wage Growth
Wage Growth shows how fast pay packets are rising across Australia, compared with the same time a year earlier.
Current Value
Quarterly Change
remained stable to the same level
Same Time Last Year
2025-Q2
💡Expert Insights
Key Takeaway
Pay rises are still solid, but the pace has eased from last year. That gives the RBA a bit more room, yet wage pressure has not fully faded.
What's Happening
Wage growth was 3.2% in 2026-Q2, flat from 2026-Q1 and down from 3.4% six months ago. It is also lower than 3.6% a year ago, so pay rises have cooled a bit.
Impact on Borrowing
At 3.2%, wages are still above the RBA’s 2-3% inflation target range, so the RBA may stay cautious on rate cuts. Higher wage growth can keep borrowing costs higher for longer.
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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.
