Will the RBA Really Lift Rates Next Week?

Fresh inflation data has reignited national debate around interest rates, with many economists now tipping a rate hike at the Reserve Bank of Australia’s next meeting. But while the headlines are grabbing attention, we believe the full picture tells a more measured story.

Inflation lifts again – but context matters

Australia’s annual inflation rate rose to 3.8% in the December quarter, up from 3.4% previously, according to the Australian Bureau of Statistics. This jump was largely driven by housing-related costs and a sharp spike in electricity prices, particularly in Queensland and Western Australia.

Electricity prices surged 21.5% as government subsidies rolled off, pushing Brisbane inflation to 5.2%, the highest in the country. Without the removal of these subsidies, power prices would have increased by a far more modest 4.6%.

Rental prices also rose 3.9% over the year, though this was slightly softer than the previous quarter. The ABS pointed to relatively stable vacancy rates across most capital cities, suggesting rental pressure is no longer accelerating at the pace seen earlier.

Add in higher supermarket prices and a seasonal jump in travel and accommodation costs, and it’s easy to see why inflation surprised on the upside.

Markets are calling a hike – but the RBA rarely rushes

Following the data release, all four major banks shifted to predicting a rate rise at the next RBA meeting, with some economists framing it as a one-off “insurance” move rather than the start of a new tightening cycle.

Market expectations for a rate hike jumped to around 75%, and the Australian dollar briefly strengthened in response.

However, this is where we take a slightly different view.

Our view: the RBA is likely to stay patient

Historically, the RBA has taken a very conservative and deliberate approach to interest rate decisions. It does not tend to raise or cut rates based on a single quarter of data, especially when that data has been heavily influenced by temporary or policy-driven factors such as expiring subsidies.

While the trimmed mean inflation figure lifted to 3.4%, it is still trending lower than the peaks seen previously. Importantly, much of the recent inflationary pressure is coming from areas outside direct monetary control, like energy pricing and seasonal travel demand.

We believe the RBA will want to see:

• Sustained inflation pressure across multiple quarters

• Clear evidence that inflation is re-accelerating, not just bumping along

• Confirmation that recent job strength and spending data continues into 2026

Until then, a “wait and see” approach remains very much on the table.

What this means for Bundaberg property buyers and owners

For Bundaberg buyers, stability is the big takeaway. Local property prices remain far more affordable than major capital cities, and borrowing conditions have been steady for some time. This gives buyers the chance to plan with confidence rather than rushing decisions based on short-term rate speculation.

For home owners and investors, Bundaberg continues to perform on strong local fundamentals. Consistent buyer demand, ongoing population growth in the region, and tight rental conditions are supporting both values and rents. Even if interest rates were to move later in the year, any change is likely to be modest rather than disruptive.

Importantly, Bundaberg’s market is less exposed to rapid price swings seen in larger cities. That resilience means fear-driven headlines out of Sydney or Melbourne often have far less impact here on the ground.

In short, local buyers and owners are operating in a market driven more by lifestyle, affordability and long-term demand than by short-term interest rate noise.

Bottom line

Yes, inflation ticked higher. Yes, some economists are calling for a rate rise. But based on the RBA’s track record and the temporary nature of several inflation drivers, we do not expect an interest rate hike at next week’s meeting.

As always, we’ll be watching closely and keeping our clients informed with clear, local insight — not just national noise.

If you’d like to chat about what this means for your buying, selling or investment plans in Bundaberg, our team is always happy to help.