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 at 3.8% - still above the RBA's 2-3% target band
- Unemployment up from 4.1% to 4.4% - labour market is softening
- GDP growth down to 0.3% and wages easing, signalling a sluggish economy
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 not back inside the RBA’s target band.
What's Happening
Latest inflation is 3.8% in June 2026, down from 4.6% in March and 4.2% six months ago. It is also higher than 3.4% a year ago. Monthly prices fell 0.1% in June, after a 0.7% fall in May, so the recent momentum has eased.
Impact on Borrowing
At 3.8%, inflation is still above the RBA’s 2-3% target, so rate cuts would likely stay cautious. If inflation keeps drifting lower, borrowing costs could ease later.
Unemployment Rate
The unemployment rate is the share of people who want a job and are looking for one, but do not have work.
Current Value
Quarterly Change
fell to a lower level
Same Time Last Year
May 2025
💡Expert Insights
Key Takeaway
Unemployment has edged up from last year but is still sitting close to recent levels, so the jobs market is easing only slowly.
What's Happening
The unemployment rate is 4.4% in May 2026, down from 4.5% in April. It is higher than 4.3% a year ago and the same as six months ago.
Impact on Borrowing
A rate near 4.4% points to a labour market that is still fairly tight, so the RBA may stay cautious on rate cuts if inflation stays above its 2-3% target.
GDP Growth
GDP growth measures how much Australia's economy is expanding or shrinking over time. It shows the change in the total value of goods and services produced across the country.
Current Value
Quarterly Change
Growth rate for this period
Same Time Last Year
2025-Q1
💡Expert Insights
Key Takeaway
Growth is crawling, not racing. With GDP stuck near last year’s pace, the economy is growing too slowly to give the RBA much pressure to tighten policy.
What's Happening
Australia's GDP growth is sitting at 0.3% in 2026-Q1, down from 0.9% in 2025-Q4 and down from 1.0% in 2025-Q2. It is the same as a year ago and slightly down from 0.4% six months ago.
Impact on Borrowing
A weak 0.3% pace gives the RBA less reason to lift rates, since growth is running well below the 2-3% inflation target range benchmark. That can keep borrowing costs from rising, and may leave room for cuts if the economy stays soft.
Home Prices
The average price of houses sold across Australia, based on ABS data.
Current Value
Quarterly Change
rose by 2.0%
Same Time Last Year
2025-Q1
💡Expert Insights
Key Takeaway
Mean house prices are now well above last year, showing the housing market is still firm rather than cooling.
What's Happening
Mean house prices rose to $1,111 in 2026-Q1, up from $1,089 in 2025-Q4 and $1,051 six months ago. That's also above $982 a year ago, so prices are still climbing.
Impact on Borrowing
Rising house prices can add to inflation pressure through housing costs, which the RBA watches closely. If price growth stays hot, it can make rate cuts less likely and keep borrowing costs higher.
Wage Growth
Wage Growth measures how fast workers’ pay is rising across Australia, based on ABS data.
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 the pace has cooled from last year. That gives the RBA a bit more room, though wages are not yet fully back to pre-tight-money levels.
What's Happening
Wage Growth is at 3.3% in 2026-Q1, down slightly from 3.4% in 2025-Q4 and the same as 2025-Q3. It is lower than 4.1% a year ago and back where it was six months ago.
Impact on Borrowing
With wage growth above the RBA’s 2-3% inflation target range, the RBA may stay cautious on rate cuts. Strong pay gains 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.
