The RBA Held at 4.35% – But Its Own Forecast Table Has No Rate Cut In It Through 2028

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This audio version covers: The RBA Held at 4.35% – But Its Own Forecast Table Has No Rate Cut In It Through 2028

The Reserve Bank left the cash rate at 4.35 per cent on 11 August in a unanimous decision. But the number brokers should be reading isn’t the headline — it’s in the forecast table of the August Statement on Monetary Policy, where the assumed cash rate rises to 4.5 per cent and never returns below 4.4 per cent through to the end of 2028.

In this article

• The Decision: A Unanimous Hold That Kept the Hike Card
• The Line Nobody Read: The Cash Rate Assumption
• Markets Are Pricing a Coin Flip on a December Increase
• The RBA Finally Put a Number on the Downturn: −1.6%
• What Actually Moved in the Forecasts
• What This Means for Brokers on the Ground
• The Seven-Day Review Playbook
• Best Interest Duty in a Two-Sided Rate Environment
• What to Watch Next
• The Bottom Line

The Decision: A Unanimous Hold That Kept the Hike Card

At its 11 August meeting the Monetary Policy Board left the cash rate target unchanged at 4.35 per cent. Two details matter more than the level itself.

First, the vote was unanimous — no dissenting push for a further increase, and none for relief. The Board is genuinely in wait-and-see mode rather than narrowly split.

Second, and more consequentially for your pipeline, the Board did not drop its tightening bias. It said it would continue to do what it considers necessary to bring inflation sustainably back to target, “including increasing the cash rate target further if upside risks materialise.” That is not neutral language. A central bank that thought it was done hiking would not write that sentence.

The reasoning is straightforward: after three increases since the start of the year, financial conditions are tighter and the economy is slowing as expected — but inflation is still too high, and is not expected to return to around the midpoint of the target band until late 2027, with upside risks to even that projection.

The Line Nobody Read: The Cash Rate Assumption

Here is where the August Statement gets uncomfortable, and where it diverges sharply from the “plateau then cut” framing that dominated pre-meeting commentary.

The forecast table publishes the technical assumptions underpinning the projections. The assumed cash rate path reads: 4.3 per cent in 2025/26, 4.4 per cent in 2026, 4.5 per cent in 2026/27, 4.5 per cent in 2027, 4.4 per cent in 2027/28 and 4.4 per cent in 2028. Across a horizon stretching to the end of 2028, the assumed cash rate goes up before edging down ten basis points — and never returns to where it sits today.

An important caveat, and it matters. This is a technical assumption, not an RBA forecast and not a commitment. The Bank is explicit that the cash rate is “assumed to move in line with expectations derived from financial market pricing as per 5 August”. It is not predicting a hike; it is feeding the market’s own curve into its model so the projections stay internally consistent. Anyone telling you the RBA has forecast a rate rise is overreading it.

But the caveat cuts both ways. The entire inflation and unemployment track — inflation back to 2.5 per cent by early 2028, unemployment at 4.8 per cent — is conditional on rates staying at or above today’s level for two and a half years. The forecast and the rate path are a package.

Markets Are Pricing a Coin Flip on a December Increase

The Statement is blunt about where the market sits: “Market participants are now pricing in about a 50 per cent chance of a cash rate increase by the end of the year.”

That is the single most useful sentence in the document for a broker sitting in front of a client this week. The market is not debating the timing of the first cut — it is a coin flip on whether the next move is up, inside five months. Nor is this a uniquely Australian read: market participants expect many advanced-economy central banks to tighten in response to domestic inflation and possible second-round effects of the Middle East conflict.

The RBA Finally Put a Number on the Downturn: −1.6%

The RBA has now made its own assessment official: housing price growth and activity in the established market “have eased by more than assumed” in the May Statement, with national housing prices down 1.6 per cent from their peak in March and auction clearance rates falling.

The Bank attributes the fall to three things working together: the cash rate increases, the tax changes announced in the federal budget, and weaker sentiment. Note the framing — it is not treating the decline as a shock, but as evidence policy is working. The Statement lists a “greater-than-expected deterioration in housing market conditions” as a downside risk to inflation, which in central-bank terms means helpful, not alarming.

On the lending side, earlier increases have largely flowed through to higher scheduled mortgage payments, “relatively high as a share of household disposable income,” and demand for new housing loans has eased while business credit growth “remains strong.” That divergence — retail lending soft, business credit strong, business investment driven heavily by data centre construction — is the clearest signal in the document about where volume is actually sitting.

What Actually Moved in the Forecasts

Comparing the August numbers with May’s (previous figures in brackets):

• Unemployment revised up at every horizon: 4.4 per cent June 2026 (4.2), 4.5 per cent December 2026 (4.3), reaching 4.8 per cent by end-2028. The labour market is loosening faster than the Bank expected.
• Near-term inflation revised down sharply: headline CPI 3.9 per cent June 2026 (4.8) and 3.6 per cent December 2026 (4.0), helped by lower fuel and travel prices.
• Medium-term inflation revised up: CPI 2.8 per cent June 2027 (2.4) and 2.6 per cent December 2027 (2.4). The trimmed mean return to 2.5 per cent now lands in early 2028.
• GDP growth nudged up: 1.4 per cent December 2026 (1.3).

The pattern is a slower, longer grind rather than a sharp break: better than feared this year, worse than hoped in 2027. Note too that the RBA repeatedly describes policy as “somewhat restrictive” — not “restrictive,” and not “tight.” That qualifier is doing real work: it signals the Board believes settings are only modestly above neutral, which is precisely why a further increase remains live if inflation disappoints.

What This Means for Brokers on the Ground

Four practical consequences.

1. “Wait for the cut” is now a genuine risk, not just a delay tactic. Clients sitting on an uncompetitive variable rate waiting for relief are, on the RBA’s own published assumption track, waiting for something that does not appear in the next two and a half years. The saving available today from repricing or switching is the saving — it is not a bridge to a better one.

2. Fixed-rate conversations need reopening — carefully. With markets pricing a coin flip on a December increase, the asymmetry has shifted. That does not make fixing right; it makes the conversation legitimate again for clients with real payment-certainty needs. Split structures deserve a second look for borrowers drifting on full variable since 2025.

3. Borrowing capacity is not about to improve. Assessment rates are anchored to lender floors plus APRA’s serviceability buffer, and nothing here supports expecting capacity relief through 2027. If your pre-approval strategy has been “get them close and wait for the rate move,” replace it with debt reduction, income documentation and structure work.

4. The volume is in business credit. The RBA is explicit that business credit growth remains strong while new housing loan demand eases. Brokers with commercial, equipment and asset finance accreditations are fishing in a materially better pond than those relying solely on residential purchase volume.

The Seven-Day Review Playbook

1. Run a back-book rate audit. Filter every client settled before 2025 and compare their variable rate against what their existing lender writes for new customers today. Repricing is the fastest revenue in this market.
2. Flag fixed expiries landing before June 2027. Contact them now, not at expiry, and model the revert rate against both a 4.35 and a 4.60 per cent cash rate.
3. Re-test live pre-approvals. Any pre-approval issued assuming easing needs reconfirming against current servicing policy before your client bids.
4. Update your client-facing rate note. Replace “waiting for the first cut” with the market’s actual position — roughly even odds on an increase by December. Cite the RBA, not commentary.
5. Review clients above six times debt-to-income. With lender DTI allocations constrained, these files need earlier placement conversations and a fallback lender identified up front.
6. Audit your diversification. If business and asset finance is under 10 per cent of settlements, the RBA has just told you where the credit growth is.
7. Check your hardship triage. Mortgage payments are high relative to household income and unemployment is forecast to rise. Know your lenders’ hardship pathways before a client needs one.

Best Interest Duty in a Two-Sided Rate Environment

Best Interest Duty obligations do not require you to forecast the cash rate. They do require your recommendation and file notes to reflect a reasonable assessment of the client’s circumstances and the options available.

Where the next move is genuinely two-sided, that means recording the rate risk you actually discussed. If a client chooses full variable, document that a further increase was raised. If a client fixes and rates later fall, your file should show the payment-certainty rationale rather than a rate prediction. The practical standard: demonstrate you presented the range of outcomes, not that you picked the right one.

What to Watch Next

• The September quarter CPI. Trimmed mean decides whether the tightening bias is exercised or quietly dropped.
• Monthly labour force releases. Unemployment at 4.4 per cent and rising faster than forecast is the main argument against another increase.
• Oil and the Middle East conflict. The RBA names global energy supply as its primary upside inflation risk; resolution changes the picture.
• Lender assessment rate and DTI policy notices. These move before the cash rate does and hit borrowing capacity immediately.
• Housing price data through spring. A deeper decline is, on the RBA’s framing, disinflationary — and therefore rate-friendly.

The Bottom Line

The hold was the easy part. The hard part is that the August Statement contains no rate relief anywhere in its published assumption profile through 2028, and the market it draws that profile from is split roughly evenly on whether the next move is an increase before Christmas.

For brokers, that removes the most common reason a client gives for doing nothing. There is no cut to wait for on the current curve, and there may well be another increase to plan around. Those who convert that into repricing conversations, structure reviews and diversified lending this quarter will be well ahead of anyone still describing 4.35 per cent as a peak. Watch the September quarter trimmed mean print — until then, the bias is up.

Sources: RBA, Statement by the Monetary Policy Board: Monetary Policy Decision, 11 August 2026; RBA, Statement on Monetary Policy – August 2026, Overview; RBA, Statement on Monetary Policy – August 2026, Chapter 3: Outlook.

Disclaimer: This article is for general information and professional development purposes only. It does not constitute legal, compliance, or financial advice. Brokers should consult their aggregator’s compliance team and, where required, seek independent legal advice regarding their obligations under the National Consumer Credit Protection Act 2009 and ASIC’s responsible lending guidelines.