RBA interest rate forecast: Third-party predictions

Australian interest rates forecasts over the next five years are closely followed by market participants because they influence borrowing costs, asset valuations and currency dynamics. While short-term policy decisions attract the most attention, longer-term expectations often matter more for investors, businesses and households making decisions beyond the immediate cycle.

Explore Australia’s current interest-rate environment, the key forces shaping future policy decisions, and how economists and institutions expect policy settings to evolve.

Current interest rate trends in Australia

The Reserve Bank of Australia (RBA) sets the official cash rate, which acts as the anchor for borrowing and lending rates across the economy. Changes in the cash rate influence mortgage rates, business loans, government bond yields, and the Australian dollar.

As of late 2025, the cash rate sits in the mid-to-high 3% range, following a prolonged period of restrictive policy aimed at containing inflation. While rates remain below their 2024 peak, they remain elevated relative to levels seen over the decade before the pandemic, when ultra-low rates were common.

According to RBA communications, the policy is still judged to be restrictive. The Bank has emphasised that it is prepared to hold rates at higher levels for longer if inflation proves persistent, particularly in domestically driven components such as services and housing-related costs.

Recent policy moves and market expectations

After aggressive tightening in 2022 and 2023, the pace of policy adjustment has slowed. The RBA has shifted from rapid rate increases to a more cautious, data-dependent approach, weighing incoming inflation, wage and labour-market data at each meeting.

Market pricing in Australian interest-rate futures suggests that traders expect rates to remain restrictive in the near term, with only gradual easing over time. This reflects the view that inflation, while lower than its peak, has not yet returned comfortably within the RBA’s 2–3% target band. You can learn more in our quantitative easing vs quantitative tightening guide.

Inflation and growth dynamics

Inflation has declined significantly from its post-pandemic highs, but progress has been uneven. Goods inflation has eased as global supply chains normalised, while services inflation has remained more resilient, supported by strong demand and rising costs in areas such as rents, insurance and healthcare.

Economic growth has slowed to around trend or slightly below. Household consumption has been constrained by higher interest rates and cost-of-living pressures, while public investment and services exports have helped support overall activity. This combination has allowed the economy to cool without a sharp contraction, giving the RBA room to keep policy restrictive.

Key factors influencing future interest rates

Several interrelated forces will shape Australian interest-rate outcomes over the next five years.

• Inflation persistence – the speed at which inflation returns to, and remains within, the 2–3% target band is the primary driver of future policy decisions. Sticky services inflation or renewed cost pressures could delay or limit rate cuts.

• Labour market conditions: unemployment is expected to drift higher only gradually, remaining near historically low levels by long-term standards. A slow easing in labour-market tightness reduces the urgency for aggressive rate cuts, particularly if wage growth remains firm.

• Economic growth and productivity – weak productivity growth has been a persistent challenge for Australia. If productivity fails to improve, higher wage growth could translate more directly into inflation, which may imply a higher neutral interest rate than in the pre-pandemic era.

• Global monetary conditions – interest-rate differentials between Australia and other major economies influence capital flows and the Australian dollar. Policy decisions by the US Federal Reserve and the European Central Bank (ECB) therefore feed back into domestic inflation via import prices and exchange-rate movements.

• Fiscal policy and public investment – ongoing infrastructure spending and fiscal support can bolster demand, potentially limiting how quickly the RBA can ease policy without reigniting inflationary pressures.

• Structural and long-term trends – demographic change, the energy transition and shifts in global supply chains may influence Australia’s long-run growth potential and equilibrium interest rate, shaping where policy eventually settles.

Explore global rate cycles with our third-party ECB interest-rate projections page.

Third-party Australian interest rate predictions 2025–2030

As of 19 January 2026, projected interest rates in 5 years in Australia reflect varying assumptions about global growth, domestic consumption, housing markets and the sensitivity of households to higher borrowing costs.

Near-term outlook (2025–2026)

Most economists expect the RBA to maintain a restrictive stance through much of 2026:

• Pitcher Partners, in its January 2026 outlook, notes that NAB expects two 0.25 percentage point hikes in February and May 2026, while CBA expects one 0.25 percentage point hike in February. Futures markets imply the cash rate will be about 3.85% by June 2026 and remain at that level for the rest of the calendar year, according to the same report (Pitcher Partners, 9 January 2026).

• Australian Broadcasting Corporation (ABC) summarises big-four forecasts by noting that NAB has pencilled in two 0.25 percentage point hikes, in February and May, while the CBA has forecast one hike in February. By contrast, Westpac and ANZ expect a prolonged hold near 3.6%, with markets pricing only a modest chance of an early move (Australian Broadcasting Corporation, 5 January 2026).

• realestate.com.au cites CBA’s economics team as continuing to see a February 2026 rate hike as the most likely scenario, followed by a period on hold at 3.85%. This implies a 3.6% to 3.85% range through late 2026 under their central case (realestate.com.au, 14 January 2026).

• A Reuters poll concluded that the RBA would hold its cash rate at 3.60% at the December meeting and keep it at that level through 2026, reflecting a consensus view that policy would remain restrictive in the absence of a significant growth shock (Reuters, 5 December 2025).

Some banks and research providers see limited scope for modest easing if inflation trends improve, while others expect rates to remain on hold for longer, particularly if services inflation proves persistent.

Medium-term outlook (2027–2028)

Beyond the near term, forecasts generally point to a gradual move toward a more neutral policy setting. As inflation converges toward the middle of the target band and labour-market pressures ease, the cash rate is expected to drift lower.

• Star Investment places the RBA cash rate at 2.85-3.00% in 2027, and 3.25% by 2028, describing this period as a transition from easing toward a stable, neutral stance (Star Investment Group Australia, 10 September 2025).

• Super Review summarises RBA commentary after the November 2025 meeting, reporting the Bank viewing financial conditions as pretty close to neutral with the cash rate at 3.6%. It also notes that external economists expect inflation to ease back into the target range by FY27, reinforcing the idea of a neutral setting in the low-to-mid 3% range rather than the sub-2.5% norms that characterised much of the 2010s (Super Review, 6 November 2025).

Longer-term expectations (2029–2030)

Looking toward the end of the decade, some forecasts anticipate a modest re-tightening as economic growth stabilises and inflation remains anchored.

• Star Investment explicitly projects the RBA cash rate at around 3.25–3.50% in 2029 and 3.50–3.75% in 2030, describing this as a return to long-term average after having bottomed near 2.85% in 2026 (Star Investment Group Australia, 10 September 2025).

• Aussie Home Loans offers a long-run scenario table suggesting that by 2030 the RBA cash rate could sit in a 2.50–3.00% range. This is framed as a period of potential stability if inflation remains subdued, which is slightly below but directionally consistent with other neutral-rate-style forecasts (Aussie Home Loans, July 2025).

What interest-rate projections mean for markets

Interest-rate expectations are embedded into asset prices, meaning shifts in the expected path of policy can drive volatility across markets, including shares, equity indices and foreign exchange.

Conclusion and final thoughts

Australian interest-rate projections over the next five years point to a period of continued restraint, followed by a slow and measured return toward more neutral policy settings. While modest easing may occur once inflation is firmly under control, forecasters broadly agree that the era of ultra-low interest rates is unlikely to return in the near future.

Instead, the prevailing view is that Australia will operate in a structurally higher interest-rate environment, shaped by persistent inflation risks, demographic change and global economic forces. For market participants, this highlights the importance of focusing not just on the next RBA decision, but on how longer-term expectations influence asset prices, funding costs and currency movements.

Past performance is not a reliable indicator of future results.

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