Millions of Australian mortgage holders will be watching closely on Tuesday when the Reserve Bank of Australia hands down its latest interest rates decision — and while the country's major banks expect the cash rate to stay on hold at 4.35 per cent, at least one expert says it could still go either way.
The RBA board has already lifted rates three times this year, and governor Michele Bullock has repeatedly declined to rule out further hikes as inflation continues to sit above the central bank's target band of 2 to 3 per cent. Before Tuesday's announcement, the board will weigh up three critical economic indicators released in recent weeks.
Inflation: Still Too High, But Showing Signs of Easing
Inflation remains the central concern for the RBA board. The most recent data from the Australian Bureau of Statistics showed a modest shift: headline inflation eased from 4 per cent to 3.8 per cent in June, while the trimmed mean — which strips out volatile price movements — held steady at 3.6 per cent.
Data insights director Sally Tindall described the figures as "perhaps better than we were expecting, but still a long way from target." The RBA's goal is to bring inflation back within its 2–3 per cent mandate, and the board has been explicit that the timeline matters.
"They've got a clock ticking in the background, particularly when it comes to inflation," Tindall said. "The RBA board has repeatedly said that time is a factor in this battle with inflation because the longer we take to get back down, the harder it becomes, and the more entrenched inflation becomes."
Adding to the complexity, global pressures — particularly conflict in the Middle East disrupting oil markets — have pushed commodity and fuel costs higher, which in turn are flowing into housing and construction. Bullock has acknowledged that Australia already faced an inflation problem before those global disruptions took hold.
Unemployment: Higher Than Expected, But Not an Alarm Bell
The labour market is the RBA's second key focus. Its mandate includes supporting full employment — keeping as many Australians in work as possible without stoking excessive inflation — making the unemployment rate, in Tindall's words, "a critical data set for the RBA."
The most recent figures put the unemployment rate at 4.4 per cent in June, slightly below an April 2026 peak of 4.5 per cent. Bullock acknowledged earlier this month that the figures had come in higher than the bank had anticipated.
Despite that, Tindall cautioned against reading too much into the number. A rate of 4.4 per cent, while elevated, is "not going to push the board into ringing an alarm bell," she said — suggesting it is unlikely, on its own, to shift the decision toward a rate cut.
Household Spending: A Complex Picture
The third indicator under scrutiny is household spending, which gives the RBA a window into how ordinary Australians are coping with cost-of-living pressures and higher mortgage repayments. In June 2026, household spending rose 0.8 per cent month-on-month.
However, Tindall warned this data is difficult to interpret cleanly. "It's difficult to isolate in this data the families that are doing it incredibly tough versus the ones that aren't really sweating from the economic pressures at the moment," she said. The aggregate figures can mask the very different financial realities households across the country are facing.
What Happens Next
All four of Australia's major banks — Commonwealth Bank, Westpac, NAB and ANZ — are tipping the RBA to leave the cash rate unchanged at 4.35 per cent on Tuesday. That consensus view is broadly shared across financial markets, though Tindall's assessment signals the decision is closer than it might appear.
For now, borrowers hoping for relief on their mortgage repayments will need to wait and see whether the combination of slowly easing inflation, a softer labour market and mixed household spending data is enough to shift the board's calculus — or whether another hold is on the cards.
