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 down to 3.7% - still above the RBA's 2-3% target band
- Unemployment up to 4.3% - labour market is cooling from last year
- GDP up to 0.8% and wages rising, but house prices keep climbing
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)
Core Inflation Trend (Monthly)
💡Expert Insights
Key Takeaway
Inflation is cooling a little, but it is still outside the RBA’s comfort zone, so one flat month is not enough to signal a clear return to target.
What's Happening
Headline inflation is 3.7% in February 2026, down from 3.8% in January and 3.8% six months ago, but up from 3.0% a year ago. Monthly inflation was flat at 0.0% in February after a 0.4% rise in January, so recent momentum has eased.
Impact on Borrowing
At 3.7%, inflation is still above the RBA’s 2-3% target, so it keeps some pressure on rates. Softer monthly momentum may ease pressure over time, but borrowing costs are likely to stay sensitive to inflation readings.
Unemployment Rate
The unemployment rate shows the share of Australians who want a job but do not have one and are actively looking for work.
Current Value
Quarterly Change
rose to a higher level
Same Time Last Year
February 2025
12-Month Trend
💡Expert Insights
Key Takeaway
The move to 4.3% is a small lift, but it shows the labour market has softened a bit after sitting at 4.1% for several months.
What's Happening
Australia's unemployment rate was 4.3% in 2026-02, up from 4.1% in January and the same time last year. It has moved up from 4.1% six months ago.
Impact on Borrowing
A higher unemployment rate can give the RBA more room to keep rates steady or cut them if inflation is still easing. For borrowers, that can mean less pressure on mortgage rates.
GDP Growth
GDP growth shows how much Australia’s economy is expanding or shrinking over time. It is the broadest measure of how much people and businesses are producing and spending.
Current Value
Quarterly Change
Growth rate for this period
Same Time Last Year
2024-Q4
12-Month Trend
💡Expert Insights
Key Takeaway
GDP growth is still modest, so the economy is moving forward but not quickly enough to signal strong inflation pressure.
What's Happening
Australia’s GDP growth is 0.8% in 2025-Q4, up from 0.5% in 2025-Q3 and higher than 0.4% a year ago. It is back at the same level as 2025-Q2 and the same as six months ago.
Impact on Borrowing
Growth below the RBA’s 2-3% inflation target range usually gives the RBA less pressure to lift rates. That can keep borrowing costs steadier, though weak growth can also limit room for lower rates.
Home Prices
The average price of houses across Australia, based on ABS data.
Current Value
Quarterly Change
rose by 2.7%
Same Time Last Year
2024-Q4
12-Month Trend
💡Expert Insights
Key Takeaway
House prices are still moving up, so housing remains a cost pressure for buyers and renters.
What's Happening
Mean house prices are rising. The latest figure is $1,075 in 2025-Q4, up from $1,046 in 2025-Q3 and $1,008 in 2025-Q1. It is also higher than $962 a year ago and $1,030 six months ago.
Impact on Borrowing
Higher house prices can keep pressure on inflation and make the RBA more cautious about cutting rates. That can leave borrowing costs higher for longer if prices keep climbing faster than the RBA’s 2-3% target.
Wage Growth
Wage Growth shows how fast Australian pay is rising over time, based on ABS figures.
Current Value
Quarterly Change
rose to a higher level
Same Time Last Year
2024-Q4
12-Month Trend
💡Expert Insights
Key Takeaway
Wage growth has cooled from last year, but it is still moving above the RBA's comfort zone, so pay gains remain a factor in rate decisions.
What's Happening
Wage Growth is at 3.4% in 2025-Q4, up from 3.3% in 2025-Q3 and the same as 2025-Q2 and 2025-Q1. It is down from 4.0% a year ago and sitting at the same level as six months ago.
Impact on Borrowing
With wages growing at 3.4%, the RBA will see pay rises as still above its 2-3% inflation target band. That can keep pressure on rates and borrowing costs.
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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.
