RBA Set to Hike Rates to 15-Year High of 4.6% as Housing Prices Fall

SYDNEY — The Reserve Bank of Australia is expected to raise interest rates for a fourth time on Sept. 29 to a 15-year high of 4.6%, leaving the housing market exposed to its worst downturn in a generation as the central bank prioritizes inflation over falling property prices. National home prices have fallen nearly 4% from their peaks, with more economists forecasting a peak-to-trough decline of 10% this cycle — the largest in three decades. HSBC projects a 13% drop if rates rise twice more. Markets are fully pricing a further increase to 4.85%, with a 70% chance of rates reaching 5.1%. Traders have abandoned expectations of rate cuts, as RBA officials signal that falling house prices alone will not be sufficient to ease policy. RBA Governor Michele Bullock cited persistent supply-side shocks, including the US-Israeli war on Iran, which has pushed oil above $100 a barrel, and an AI-driven data centre investment boom. An unusually resilient labour market continues to support household incomes, complicating the inflation outlook.