Could two more RBA rate hikes push Australia into recession?

The Reserve Bank of Australia has already increased interest rates 3 times this year, taking the cash rate to 4.35%. However, inflation remains above the central bank's 2% to 3% target. The latest ABS inflation figures showed annual headline inflation at 3.5% in July, while trimmed mean inflation remained at 3.6%. Higher oil prices and global inflation pressures are adding to the RBA's concerns.

According to The Australian, HSBC chief economist Paul Bloxham has warned that the Australian economy could be heading for a difficult few months. He expects economic growth to come close to stalling in the December and March quarters. That has him putting the risk of a technical recession at close to 50%. A technical recession occurs when the economy contracts for two consecutive quarters. For comparison, Bloomberg's surveyed recession probability over the next 12 months is currently just 20%. He points to Australia's weak productivity growth, which has left the economy with very little room to expand without pushing inflation higher.

Media additions

In this month's Finder RBA Cash Rate Survey™, 41 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy. The majority of panellists (90%, 37/41) expect the RBA to hike the cash rate on Tuesday, raising it to 4.60%. What's more, 48% (19/40*) expect at least one further hike by the end of 2026, with most tipping November. Aussies with the average home loan of $736,259 would pay around $427 more per month – roughly $5,124 a year – than they were at the start of 2026 if the cash rate rises to 4.60% on Tuesday.

Dr Shane Oliver, Chief Economist at AMP said the RBA's credibility was on the line. "While the RBA is meeting its full employment objective, this is not the case for its inflation objective, with underlying inflation running well above target… after more than five years of having inflation above target the RBA risks further losing its credibility if it decides to extend its wait and see approach," Oliver said. Mala Raghavan from the University of Tasmania said the persistence of inflation should not be interpreted as evidence that cash rate hikes are losing effectiveness.

Not everyone is convinced it's the right call. Adjunct Professor Noel Whittaker from QUT expects a hike but doubts it will work. "I also think it will be a fairly pointless exercise. Higher rates will hit people with mortgages hard, while doing little to address the global forces now driving inflation," Whittaker said. Nicholas Gruen from Lateral Economics said raising rates isn't an equitable way to do it but given the way politics works, it's what we're left with.

The 30-year fixed mortgage rate in the United States hit 7.03% during the week of September 24, 2026. Sarah Breeden, deputy governor for financial stability and seen as a swing vote on the MPC, told the London Macro Policy Forum that persistent energy shocks raise the odds of knock‑on price and wage effects policymakers need to address.

What to Watch Next

• 29 September 2026: The RBA will announce its next interest rate decision on Tuesday, 29 September.
• Late September Labour and Price Releases: Policymakers will review incoming employment data and upcoming monthly consumer price indices to gauge underlying momentum.
• Q4 Borrowing Trends: Financial analysts will closely track whether commercial lenders adjust variable and fixed home loan products following the central bank's announcement.