During Asian trading hours on Tuesday (November 3), AUD/USD edged lower and traded near 0.6980, on track for two consecutive daily declines. The currency weakened right after the rate hike, driven by the split voting outcome and changes in the official statement from the Reserve Bank of Australia (RBA).

The RBA raised its overnight cash rate to an 18-year high, marking the fifth rate increase this year. The voting result was tighter than market expectations, with three out of nine board members voting to keep rates unchanged.

At the November policy meeting, the Monetary Policy Board lifted the cash rate by 25 basis points to 4.85%. It stated that the central bank would continue to take necessary action to return inflation to the target band. The key revision was the removal of the phrase that signalled potential further rate hikes if needed.

Following the announcement, AUD fell by roughly 0.3% to 0.6980, while the 3-year Australian government bond futures dropped 3 points to 95.14. Given the divided vote, market pricing widely points to a rate hold in December.

1. Voting & Statement: 6-3 Split, Forward Hike Guidance Removed
Market pricing had put the probability of a November rate hike at 88% ahead of the decision, and 30 out of 32 surveyed economists predicted a 25bp increase.

The board noted in the official release: “Given the revised inflation outlook and persistent upside risks, the board judged that further tightening of financial conditions was required to bring inflation back to target. The board will continue to do what is necessary to return inflation sustainably to the target range.”

The change in wording represents the core policy shift. By deleting the forward tightening bias, the RBA moved from pre-set hawkish guidance to a data-dependent wait-and-see stance. The 6-3 split vote further confirmed this shift; three members opposed the hike, reflecting substantial internal disagreement over additional policy tightening.

2. Policy Cycle: 125bp Rate Hikes This Year Reverse 2025 Easing
The RBA has delivered a total of 125 basis points of rate rises in 2026, fully unwinding the 75 basis points of rate cuts implemented in 2025. Australia has remained among the more hawkish central banks across developed markets.

Policy divergence emerged among peer central banks: the Federal Reserve kept rates steady this month, while the Reserve Bank of New Zealand paused its hiking cycle by a narrow margin.

3. Inflation Risks: Core Inflation Hits Two-Year High, Oil Prices Add Pressure
Rising global oil prices have lifted overall price pressures and raised the risk of de-anchored inflation expectations.

Australia’s core inflation accelerated to 3.7% in the third quarter, a two-year high. The gauge has stayed above the RBA’s 2%–3% target range for more than five consecutive years. This persistent inflation justified the latest rate hike. Even after removing forward hike signals, the central bank continued to highlight ongoing upside inflation risks.

4. Economic Headwinds: Housing Downturn Hits 40-Year Low, Unemployment Rises to Five-Year Peak
Monetary tightening has weighed heavily on the housing sector, which is now experiencing its sharpest slowdown in four decades. The property slump will suppress household consumption via negative wealth effects and drag down real estate, conveyancing and removal industries.

The labour market also softened, with the jobless rate climbing to 4.7%, a five-year high. Even so, the RBA assessed the labour market as still relatively tight, a sustained source of inflationary pressure.

Higher borrowing costs have slowed economic growth, yet robust demand from data centre investment and supply constraints have kept inflation pressures from easing rapidly.

Conclusion
The RBA raised the cash rate by 25 basis points to 4.85%, the fifth hike this year and the highest level in 18 years. The 6-3 split vote and the removal of forward hike guidance have shifted the policy bias to caution. Markets broadly expect the RBA to stay on hold in December.

The two-year high core inflation reading of 3.7% — which has remained above target for five years — underpinned the November tightening. Meanwhile, the 40-year housing downturn and five-year high unemployment rate act as constraints on further hikes.

The RBA now faces a trade-off between stubborn inflation and slowing growth. Future policy moves will be entirely data-driven, hinging on incoming economic releases and the lagged impact of past rate increases. The option of additional tightening remains open if inflation fails to cool.