Economics Live: Australia Raises Rates to an 18-Year High — Monetary Policy for Your A-Level Essays
The news: On Tuesday 3 November 2026, the Reserve Bank of Australia raised its cash rate by 0.25 percentage points, from 4.60% to 4.85%, its highest level since November 2008. It was the fifth rise of 2026, and the board was split six votes to three. The RBA said inflation is “broadly based” and now expected to stay above 3% for the coming year, above its 2–3% target, partly because of higher fuel prices linked to the Middle East conflict and tighter domestic capacity than it had thought.
How to use this in an essay: This is strong evidence for a 25-mark question such as “Evaluate the effectiveness of interest rate rises in reducing inflation” (Edexcel 9EC0 Theme 2.6; 8EC0 Theme 2.6; iGCSE 4EC1 Section 4; IAL Unit 2). Walk through the transmission mechanism: higher rates raise mortgage repayments and borrowing costs, reduce consumption and investment, and may strengthen the currency, which lowers import prices. AD falls and inflationary pressure eases. Australian banks such as Macquarie are already passing the rise on to variable mortgage rates.
Evaluation point: Time lags matter. Governor Michele Bullock admitted the last couple of rises “haven’t even started to flow through yet”. Also, raising rates cannot increase the supply of oil: if inflation is cost-push, higher rates mainly cut output and jobs. The RBA itself said Australia’s unemployment rate has risen, which shows the trade-off between price stability and employment.
Source: rba.gov.au