Interest Rate Predictions Next 5 Years Australia (Oct 2026)
Author
Emmanuel Sarris
Date Published
Short answer (October 2026): the Reserve Bank's cash rate is 4.60% after a rise on 29 September 2026, the fourth increase this year. All four major banks expect another 0.25% rise to 4.85% at the RBA's meeting on 3 November 2026, and most then pencil in cuts from the second half of 2027. The RBA's own August 2026 forecasts assumed a cash rate of around 4.4% to 4.5% through to the end of 2028. Beyond 2028, nobody forecasts with any confidence, so a five-year view is really a set of scenarios.
Forecasts change. This article was updated on 29 October 2026, before the RBA's 3 November 2026 decision. Rates, forecasts and bank calls can move within weeks, so check the RBA's cash rate page for the latest figure. This is general information, not financial advice.
Where interest rates are now
The cash rate sat at a record low of 0.10% until May 2022, then rose 13 times to 4.35% by November 2023. Three cuts in 2025 took it to 3.60%. In 2026 the RBA reversed course:
4 February 2026: up 0.25% to 3.85%
18 March 2026: up 0.25% to 4.10%
6 May 2026: up 0.25% to 4.35%
17 June and 12 August 2026: on hold
30 September 2026: up 0.25% to 4.60%, the highest cash rate since late 2011
Inflation picked up instead of continuing to fall. In its 29 September 2026 statement, the RBA said disruption to global oil supply had pushed up energy prices, fuel costs were flowing into other prices, and growth and inflation had both been higher than expected. It said it could raise rates further if needed.
The latest data has not helped. The ABS reported on 28 October 2026 that the CPI rose 4.3% in the year to September 2026, up from 4.0% in August, with annual trimmed mean (underlying) inflation at 3.6%. The RBA's target is 2–3%, aiming for the 2.5% midpoint.
What the RBA forecasts
The RBA publishes forecasts every quarter in its Statement on Monetary Policy. The August 2026 Statement (forecasts finalised 5 August 2026) projected:
Headline inflation: 3.6% by December 2026, 2.6% by December 2027, 2.4% by December 2028
Underlying (trimmed mean) inflation: 3.3% by December 2026, 2.6% by December 2027, 2.4% by December 2028
Unemployment: rising gradually from 4.5% to 4.8% by the end of 2028
Cash rate assumption: about 4.4% at end-2026, 4.5% through 2027 and 4.4% in 2028
The cash rate line is not an RBA promise; it reflects what markets were pricing in early August, and it has already been overtaken: the rate is now 4.60% and September's inflation was higher than expected. The RBA said inflation risks were tilted upwards (a longer Middle East conflict, more pass-through of fuel costs). Its next Statement is due with the November decision.
What the major banks forecast
After the September inflation figures, all four major banks forecast a November rate rise. These are forecasts by each bank's economists, as reported by The Adviser and Canstar on 28 October 2026:
Commonwealth Bank: a 0.25% rise to 4.85% on 3 November (which it called an 'insurance hike'), with cuts expected from around August 2027
Westpac: a rise in November, and says the risk of another rise, most likely in February 2027, has increased; first cut pencilled in for around August 2027
NAB: a 0.25% rise in November, after which it expects the RBA to pause; cuts from around August 2027
ANZ: a 0.25% rise in November; cuts from around November 2027
Bank forecasts are revised often. Treat the timing of cuts as a best guess, not a schedule.
Interest rate predictions for the next 5 years
No official forecast runs to 2031, so the honest five-year view comes in stages.
Late 2026 to mid-2027: higher for a while
The near-term debate is whether the cash rate peaks at 4.60%, 4.85% or higher. With underlying inflation at 3.6%, the banks expect rates to stay at or above current levels well into 2027.
Late 2027 to 2028: the first cuts, if inflation behaves
If underlying inflation falls back towards 2.5% by 2028, as the RBA forecasts, rates can come down gradually; that is the basis for the banks' August to November 2027 timing. Even so, the RBA's assumption keeps the cash rate in the mid-4% range through 2028, so a quick return to the 2025 low of 3.60% is not the central case.
2029 to 2031: scenarios, not forecasts
Gradual easing: inflation settles inside the 2–3% band and the cash rate drifts lower over several years
Higher for longer: energy prices, weak productivity or strong demand keep inflation sticky, and rates stay near today's levels
Sharper cuts: a downturn here or overseas pushes unemployment up quickly and the RBA cuts faster than expected
None of these can be predicted five years ahead, so plan around a range rather than a single number.
What interest rates mean for you
Home owners and borrowers
Each 0.25% rise adds roughly $99 a month to repayments on a $600,000, 30-year principal-and-interest loan (moving from 6.50% to 6.75%, for example). Interest on the loan for your own home is not tax deductible, so the full cost comes out of after-tax income. Money in an offset account cuts the interest you pay, and unlike a savings account, the benefit is not taxed. If you are refinancing or applying for a new loan and you are self-employed, see why lenders ask for an accountant's letter and how existing debt affects your borrowing power.
Savers and retirees
Higher rates mean better returns on deposits, but interest income is taxed at your marginal rate and inflation erodes the rest. With inflation above 4%, the real after-tax return on many savings accounts is close to nil or negative. Banks report interest to the ATO, so include all of it in your return.
Property investors
Interest on a loan used to buy or hold a rental property is generally deductible; interest on your home loan is not. What counts is what the money was used for, not which property secures the loan, and if you redraw for something personal, only the investment share stays deductible.
Example: a 0.25% rise on a $500,000 interest-only investment loan adds $1,250 a year in interest. If you are negatively geared and on a 30% marginal rate plus the 2% Medicare levy, the after-tax cost is about $850. But from the 2027–28 income year, rental losses on established residential property bought after 7:30pm (AEST) on 12 May 2026 can no longer be offset against wages or business income; they carry forward instead. See negative gearing and CGT changes from 1 July 2027 and our guide to investment property tax deductions. For help with your rental schedule, see our rental property tax returns service.
Businesses
Interest on business borrowings is generally deductible, which softens the after-tax cost of a rate rise. Two related rates to watch: the Division 7A benchmark interest rate for loans from a private company to its shareholders is 8.77% for 2026–27 (8.37% for 2025–26), and the ATO's general interest charge is 11.51% for October to December 2026. Since 1 July 2025 the interest the ATO charges is no longer deductible, so a tax debt can now cost more than a deductible business loan. Our business accountants can help you plan for different rate scenarios.
The bottom line
As at 29 October 2026, the cash rate is 4.60%, the major banks expect 4.85% in November, and relief looks unlikely before the second half of 2027. The safest five-year plan is one that still works if rates stay where they are: build buffers, keep investment and private borrowing separate, and claim the interest you are entitled to.
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