Australia's Reserve Bank Hikes Rates to a 15-Year High as AI Boom and Iran War Fuel Inflation

Australian borrowers just took another hit. On 29 September the Reserve Bank of Australia raised its cash rate to 4.6 percent, the highest level since 2011.

The board voted unanimously for the 25 basis point move from 4.35 percent. It is the fourth hike of 2026, adding up to a full percentage point of tightening in a single year.

The reasons read like a tour of the global economy. The board pointed to higher prices flowing from the AI investment boom and to fears that businesses would pass rising costs straight on to consumers. It is the same worry US policymakers have been voicing, with Fed Governor Lisa Cook warning that AI data center spending is broadening inflation.

Governor Michele Bullock also singled out the US war on Iran. Fuel, fertiliser, and transport prices, she said, are now "permanently higher." Underlying inflation is expected to sit around 3.6 percent, well above the RBA's 2 to 3 percent target band.

The board said it would raise rates further if needed. Bullock said the bank does not expect a recession, but warned that a dramatic slowdown might be required if households start treating inflation above 3 percent as normal.

She also left the door open the other way, saying maybe there does not need to be any more rises. For mortgage holders already paying the most in 15 years, that is the only line worth hoping on.