RBA warns inflation is 'materially worse' as unemployment hits 4.7%: a fifth rise is in play

The Reserve Bank's second-most senior official said on 21 October that "the inflation outlook looks materially worse than we projected in the August report." Deputy Governor Andrew Hauser's comments came 13 days before the Board's next decision, and turned a likely hold into a close call. For landlords already paying around 6.75% on investment loans, a fifth rise this year would take the cash rate to 4.85%.

This is the late October issue of The Weekly. Since our October rental market issue on 14 October, the jobless rate has risen, the RBA has spoken four times and the sales market has slowed further. Everything below is as at 25 October 2026.

4.85%

The numbers that matter this week

What the RBA said this week

Four RBA officials spoke in public between 18 and 23 October. Two of them said things landlords should note.

Hauser: inflation is running hotter than forecast

Hauser's fireside chat at Citi's investment conference in Sydney was the most direct signal. He said the upside risks the Board flagged in August had "crystallised", that oil prices were "about a third higher than we assumed in the August projection", and that the September quarter trimmed mean was "definitely north of what we were assuming, in August."

He was also worried about expectations. Some businesses, he said, now see "maybe three to three and a half per cent is the new normal", and "we can't allow expectations to shift away from the target." That is the language central banks use before they act.

He did not say which way the Board would go. He described a choice between doing more on inflation, at a cost to jobs, and holding steady while the inflation risk builds, and called it "hard choices." He repeated the September statement's line that the Board stands ready to do more if needed.

According to CBA's markets team, market-implied odds of a November rise jumped from about 24% to 56% after the comments. That is the market calling it a coin toss with a lean towards a rise.

Kent: the tax changes are doing some of the work

Assistant Governor Christopher Kent spoke on 19 October at CBA's markets conference. He said policy is "somewhat restrictive" and the open question is "is it restrictive enough?" He also reminded the room that "monetary policy operates with long and variable lags."

His comments on housing are worth reading closely. Kent said housing credit growth has been weakening, as expected, and that the tax changes affecting investors are "moving in the same direction as monetary policy." In other words, the RBA sees the May Budget's negative gearing and CGT changes as part of the tightening already in the system.

What the RBA thinks of landlords' tenants

Hauser also spoke about who is hurt most by inflation. He said about 2% of mortgage holders are in negative cash flow and the median borrower holds more than a year of savings in buffers. For renters, the figure is about 15%, and he called high inflation "a gut punch" for "those without a mortgage who are renting on low incomes."

That matters for your rent roll. A tenant whose budget is already negative has little room to absorb an increase, and arrears are more likely in a slowing jobs market.

The jobs market is the case for holding

The ABS Labour Force release for September, out on 15 October, showed the unemployment rate rising 0.1 points to 4.7%. Employment fell by 39,300 people and the participation rate fell 0.2 points to 66.8%. In trend terms the jobless rate held at 4.6% and employment grew modestly.

Hauser acknowledged the labour data had been weaker than expected, though he noted recent ABS survey changes may be adding noise, and said whether unemployment reaches 5% is part of the Board's forecast debate. CBA's economists, who expect a hold, point out that unemployment has risen from a low of 3.4% and that housing turnover is running 20% to 30% below a year ago.

For landlords, a softer jobs market cuts two ways. It makes a rate rise less likely. It also means more tenants under pressure, and fewer people forming new households, which shows up as more vacancies over time.

Wednesday's CPI is the deciding number

The ABS releases the September CPI at 11:30am AEDT on Wednesday 28 October. It completes the September quarter, and the quarterly trimmed mean is the measure the Board watches most closely.

Headline inflation was 4.0% in the year to August, up from 3.5% in July, and the trimmed mean held at 3.6%. CBA forecasts a 1.0% rise in the trimmed mean over the quarter, keeping the annual rate at 3.6%, and expects rent inflation of about 3.5% over the year.

A practical way to read it on Wednesday: a quarterly trimmed mean at or above 1.0% fits Hauser's warning and makes a rise more likely. A clearly softer result gives the Board room to wait for the next set of forecasts. Either way, the decision is due on 3 November, the second day of the 2 to 3 November meeting. The next meeting after that is 7 to 8 December.

What a fifth rise would cost

We use the same example as our monthly issues: a $600,000 investor loan, which is 80% of a $750,000 property. At Cotality's national gross yield of 3.85%, the property earns about $555 a week, or $2,406 a month, before expenses.

A November rise adds $125 a month to the interest-only bill, or $1,500 a year. On principal and interest the repayment rises by about $100 a month. Interest alone would then run about $1,094 a month above the gross rent on this example, before rates, insurance, strata, maintenance and land tax.

These figures are an illustration only. Your own position depends on your rate, loan structure, offset balance, tax rate and actual rent.

The sales market keeps slowing

Cotality's October chart pack shows how far buyer demand has fallen. An estimated 39,747 homes sold nationally in September, 20.9% fewer than a year earlier. National values fell 3.7% over the September quarter and are 5.2% below the March peak.

Supply is building because homes are not selling, not because more owners are listing. New listings were 7.9% lower than a year ago, yet total advertised stock was 19.1% higher at 145,573 homes. The median home took 41 days to sell nationally, up from 26 days a year earlier. Perth was the fastest capital at 26 days and Canberra the slowest at 50.

Vendors are giving ground. The average discount from first asking price to sale price in the capitals reached 4.4%, the highest in five years, and 3.9% in the regions. At auction, the combined capital clearance rate fell to 44.1% in the week to 11 October, and the four-week average was 48.3% at the start of the month, against 64.4% in late February.

Cotality estimates the rate rises since February have cut the borrowing capacity of a median-income household by about $90,000, or 9%. That is the main reason buyers are scarce, and it applies to investors as much as owner-occupiers.

Rents: houses up, units down

SQM's weekly rent index for the week ending 20 October confirms the split we reported a fortnight ago. National house asking rents were $790 a week, up 1.2% over the rolling month. Unit asking rents were $609, down 1.0%. Combined asking rents were $706.29, 6.9% higher than a year earlier.

Spring usually lifts house rents, so the unit figure is the one to watch. Our October issue found unit rents falling in seven of the eight capitals, with vacancies highest in Sydney, Melbourne and Canberra. SQM's October vacancy rates are due in mid-November.

Fewer units in the pipeline

The longer-term supply picture is moving the other way. The ABS building approvals for August showed total dwelling approvals down 6.1% to 16,953. House approvals rose 3.7% to 10,885, the highest since August 2021, but approvals for apartments, townhouses and other non-house dwellings fell 21.2% to 5,674.

Apartments take years to build, so this will not ease today's unit market. It does suggest the current softness in unit rents may not last as long as the current glut of listings implies. September approvals are out on 2 November.

Tax returns: one week left

If you lodge your own 2025-26 return, the ATO deadline is Monday 2 November, because 31 October falls on a Saturday. If you want a registered tax agent to lodge for you under their later dates, you need to be on their client list by Saturday 31 October.

The new negative gearing rules do not apply to this return. Our guide to rental property tax deductions covers what you can claim, including the interest apportionment errors the ATO keeps finding.

Dates to watch

• Wednesday 28 October: ABS CPI for September, completing the September quarter.
• Saturday 31 October: last day to get onto a tax agent's client list for the 2025-26 return.
• Monday 2 November: self-lodged tax returns due; Cotality's home value index for October; ABS building approvals for September.
• Tuesday 3 November: RBA decision at the end of the 2 to 3 November meeting.
• Wednesday 11 November: ABS lending indicators for the September quarter, the first full quarter after the Budget.
• Mid-November: SQM vacancy rates for October.
• Thursday 19 November: ABS Wage Price Index.
• Tuesday 24 November: ABS Labour Force for October.
• 7 to 8 December: the last RBA meeting of 2026.

What this means for landlords

1. Plan for 7.0% now, not on 3 November. If lenders pass on a rise in full, the average investor variable rate moves to around 7.0%. Work out your monthly shortfall at that rate this week, and if it breaks your buffer, speak to your lender or broker before the decision rather than after.
2. Check your fixed rate expiry dates. If a fixed period ends in the next six months, ask your lender what revert rate you would move to. Compare it with the variable rate and any fixed offers before you decide.
3. Keep renewals realistic, especially for units. Asking rents for units are falling and the RBA itself says many low-income renters are already in negative cash flow. Holding a reliable tenant at a modest increase usually beats weeks of vacancy and re-letting costs.
4. Watch for early signs of arrears. Unemployment is rising. If a tenant falls behind, talk early and follow the process your state regulator sets out. A payment plan agreed in week one is easier than a tribunal application in week six.
5. Don't sell into a 4.4% discount without a reason. With buyers scarce and borrowing capacity down 9%, vendors are taking less. Gains up to 1 July 2027 keep the 50% CGT discount whenever you sell, as we explain in the CGT changes for landlords, so the tax changes alone are no reason to rush.
6. If you are buying, use the leverage. Longer selling times and wider discounts give investors room to negotiate. The property still has to work at today's rates, so run the numbers at 7.0% before you bid.
7. Lodge your return or call your agent this week. Self-lodgers have until 2 November; agent clients need to be signed up by 31 October.