Two More RBA Rate Hikes Expected — Just Not in June

Westpac has shifted its RBA forecasts to August and September 2026 — breathing room in June, but the rate cycle is not done.

Westpac Pushes Out the Rate Calendar

Borrowers watching the Reserve Bank of Australia closely received some short-term relief this week — but not a change in direction. Westpac has revised its forecasts for the next two expected cash rate increases, pushing the timing from June and August out to August and September 2026. The total number of expected hikes has not changed. Only the schedule has.

Australian Broker reports that Westpac chief economist Luci Ellis read this week's Monetary Policy Board meeting and Governor Michele Bullock's press conference as a signal that a back-to-back hike in June is "no longer the base case." Ellis says another June hike remains possible, but is now the less likely outcome.

The RBA this week delivered its third consecutive 25-basis-point rate hike, taking the official cash rate back to 4.35% — matching its previous peak — in an 8-1 board decision. The language from Governor Bullock was telling: the recent sequence of hikes was framed as addressing "pre-existing inflation pressures" while creating "space" to assess the economic fallout from the Middle East conflict. That choice of words — "space" — is what Ellis interpreted as a signal the board wants room to observe incoming data before acting again.

For borrowers on variable rates, this is a meaningful tonal shift, even though the medium-term outlook for rates hasn't improved materially.

The Inflation Problem Has Not Gone Away

Despite the shift in June's probability, Westpac's underlying view on inflation hasn't improved. The bank's updated May Market Outlook, incorporating a revised assumption for when the Strait of Hormuz is expected to reopen, points to slightly higher inflation than previously forecast — sitting above the RBA's own projections through the second half of 2026.

Westpac expects trimmed mean inflation to run above the central bank's profile, driven largely by businesses passing on non-labour cost increases — fuel, logistics and raw material costs that work through supply chains and end up in consumer prices without appearing in wage data. The RBA has flagged this risk itself, noting that "higher fuel prices are likely to have second-round effects on prices for goods and services more broadly."

Ellis argues those second-round effects will be stronger than the RBA currently assumes, with a particular knock-on for home-building costs. That matters directly for anyone in construction finance — and more broadly, because constrained new supply keeps upward pressure on existing dwelling prices. Westpac's oil and fuel price assumptions also sit above the futures-based figures in the RBA's own forecasts, adding further upside risk to their inflation projections relative to the central bank's.

The June and September quarter CPI releases are expected to be pivotal. Ellis describes them as likely to act as a "wake-up call" on how readily firms are passing higher costs through to consumers — and whether those increases reverse if fuel costs ease, or become more entrenched.

Rate hikes are already having an effect. National dwelling price growth dropped from 0.6% in January to just 0.2% in April. Prices are now falling in Sydney and Melbourne, while Brisbane, Adelaide and Perth continue to record gains. The weight of higher rates is being felt unevenly across the country.

What to Do Before the Next Hike Arrives

Ellis is explicit that this is a tactical timing revision, not a changed outlook. Westpac still expects two more hikes. A June hold is more likely than not, but not certain. August and September are the new expected timing for those moves.

For borrowers who have been considering a move but deferring action, there may be a window — potentially from now until late July — where rates hold steady. That window is worth acting on.

**Review what you're paying.** Variable rate borrowers on older loans are often paying more than the rate being offered to new customers today. Check [today's cheapest home loan rates](/home-loans/cheapest) to see how your lender compares to what's available in the market right now.

**Model your repayments at higher rates.** Use our [repayment calculator](/calculators/repayment) to see what two further 25-basis-point rises would mean for your monthly costs at your current loan balance and term.

**Explore refinancing before the next hike.** Even in a rising rate environment, switching lenders can lower your rate if your current loan is uncompetitive. The [refinance savings calculator](/calculators/refinance-savings) can help estimate what a lower rate would save you over the life of the loan.

**Get advice from a broker.** A mortgage broker can help you assess whether fixing a portion of your loan, refinancing, or restructuring your debt makes sense given the revised rate timeline. The window before August is likely shorter than it feels.

[Source: Australian Broker](https://www.brokernews.com.au/news/breaking-news/rba-pause-tips-next-rate-hikes-to-august-and-september-289322.aspx)