RBA Cash Rate Hits 4.60%: Australia Now Second Only to Iceland

On 29 September 2026 the Reserve Bank of Australia raised the cash rate by 25 basis points to 4.60 per cent. The decision was unanimous, nine votes to nil.

It is the fourth increase this year, taking the cash rate to its highest level since November 2011. A full percentage point has been added in 2026 alone, and the Board was explicit that it is not finished: it will do what it considers necessary, "including increasing the cash rate target further if needed."

Where Australia now sits

Of the 41 economies the IMF classifies as advanced, only Iceland, at 8 per cent, has a higher policy rate.

Australia now pays more for money than the United States, the United Kingdom, the eurozone, Canada and Japan.

The drivers are largely imported. Inflation is running at 3.5 per cent against a 2-3 per cent target, with the RBA pointing to the broadening Middle East conflict pushing global energy prices well above its August assumptions.

What 4.60 per cent does to a leveraged position

The headline rate is not what investors pay. Each 25 basis point move adds roughly $161 a month to repayments on a $1 million loan and cuts borrowing capacity by $30,000 to $40,000.

Run that against what Australian residential property yields. Gross yields in the major capitals have long sat in the 3 to 4 per cent range, and net yields land lower again after rates, strata, management and maintenance.

The result is negative carry, and it is not marginal. An investor borrowing at 6 to 7 per cent against an asset yielding 3 to 4 per cent gross funds the shortfall from income every month, on the expectation that capital growth makes up the difference later.

That worked when money cost almost nothing. It is a different proposition at a 15-year high, with the central bank signalling it may go further.

This is the real story. Not that Australian property is bad, but that the arithmetic that justified leveraged domestic exposure at 0.10 per cent does not hold at 4.60 per cent.

The honest counterweight: the currency

Anyone telling you to simply move capital offshore is leaving something out.

The Australian dollar has been trading around 70 US cents. A soft AUD makes every foreign asset more expensive to buy, and exchange rate risk runs for the life of the holding. It cuts both ways: further AUD weakness could help on repatriation, while an AUD recovery could reduce returns when converted back. It is a real cost that belongs in any offshore decision.

The point is not that offshore is automatically better. It is that the comparison has changed, and assets that were not worth examining three years ago now deserve a second look.

What investors are actually examining

Markets where the yield gap is structural. Dubai residential has been delivering gross yields well above Australian capitals, with no annual property tax and no capital gains tax on residential property. The maths is different in kind, not just degree.

Assets where residency is part of the return. Greece, Cyprus and several other European programmes attach residency rights to qualifying property investment. When the asset buys optionality as well as income, yield is no longer the whole picture.

Income-producing commercial and hospitality in Europe and the UK, where net initial yields of 6 to 7 per cent are available on let assets.

Markets at a different point in the cycle. Australia is tightening while the eurozone, Canada and Japan sit far lower, which shapes both asset pricing and the competition for stock.

None of this is straightforward. Foreign ownership rules, tax treatment, financing access, currency exposure and the practical difficulty of managing an asset on the other side of the world are all real. Anyone presenting international property as simply higher-yielding is selling something.

Frequently asked questions

Westcourt Advisory is a cross-border advisory firm. This article is provided for general information and does not constitute legal, financial, tax or investment advice. Rate and market data is drawn from the Reserve Bank of Australia and published market sources as at 30 September 2026 and is subject to change. Prospective investors should obtain independent professional advice appropriate to their own circumstances.