Australian Economy Weekly Update — Week Ending 6 February 2026
On Tuesday, the RBA raised the cash rate by 25 basis points to 3.85%, marking the first rate rise since November 2023 and partially unwinding the easing cycle implemented in 2025.
With inflation tracking above the RBA’s 2%-3% target band, the rate rise was widely anticipated and largely priced in by financial markets. The RBA expects inflationary pressures to persist for the remainder of this year, with potential for further monetary policy intervention required to combat the upward trend.
Under the RBA’s revised inflation forecasts, inflation is expected to return to the target band by June 2027, with near-term growth stronger than previously forecast. With the labour market remaining resilient and the unemployment rate holding steady at 4.1%, the RBA will be incentivised to make any necessary adjustments to the cash rate to counter the recent resurgence in inflation.
For borrowers on variable rate mortgages, this translates into an immediate increase in debt servicing costs, placing additional pressure on their businesses' cash flows. In this environment, lender quality is critical. Lenders with conservative underwriting, LVR covenants, active portfolio management and strong collateral backing are in a better position to manage downside risk, particularly if further rate rises are on the way.
Source: Australian Bureau of Statistics, Consumer Price Index, Australia, December 2025.
Reserve Bank of Australia, January Monetary Policy Decision, 4 February 2026.