RBA Lifts Cash Rate to 3.85% as Australia Faces Fresh Inflation Shock

Inflation in Australia fell after peaking in 2022, but rose again in the second half of 2025. The Reserve Bank of Australia on Tuesday raised the cash rate target by 25 basis points to 3.85%. Household spending and business investment picked up, housing activity and prices increased, and capacity pressures widened. Financial conditions eased during 2025, credit stayed readily available, and earlier rate cuts have not yet fully affected demand, prices, and wages. The labour market stayed tight, with unemployment lower than expected and underutilisation remaining low. Wage Price Index growth eased, but wages and costs stayed high. The Board unanimously voted today as it focuses on its mandate to deliver price stability and full employment.