Well… that escalated quickly.

In its first meeting of 2026, the Reserve Bank has lifted the cash rate by 0.25%, officially reversing part of last year’s cuts and signalling that inflation is running too hot for comfort.

In today’s LIVE RBA & Economic Update, Ben Kingsley and economist Evan Lucas broke down the decision, the numbers that forced the Board’s hand, and what this surprise turnaround could mean for buyers, renters, households and investors.

What Happened Today?

The RBA increased the cash rate by 25 basis points to 3.85% — and the statement was short, sharp and very clear.

Inflation has bounced higher for two consecutive quarters, services inflation isn’t easing, and the Board now expects inflation to sit above the target band for longer than previously thought.

Translation: The RBA is worried… and today’s hike may not be the last.

Why the RBA Pulled the Trigger

Ben and Evan unpacked several key forces that pushed the Board into action:

  • Inflation is re-accelerating, not cooling — especially on the “sticky” services side.
  • Government spending remains high, adding heat to an already stretched economy.
  • Energy prices are surging, with underlying electricity costs up more than 20%.
  • Jobs data surprised on the upside, with unemployment falling to 4.1% and employment lifting strongly.
  • Consumers are still spending, even after last year’s cuts, keeping demand elevated.

When you put all of this together, the RBA felt it had no choice but to tap the brakes.

Australia vs the US: Two Different Stories

A big part of today’s livestream was comparing Australia’s sluggish productivity to the US’s rapid growth.

While the US is powering ahead on the back of business investment, AI, deregulation and onshoring, Australia is hitting capacity constraints — everything from labour to regulation to energy costs is limiting how fast our economy can grow.

It’s a reminder that long-term economic strength isn’t just about interest rates… it’s about productivity, innovation and private investment.

What This Means for the Property Market

Despite the rate hike, the housing market continues to surprise.

January delivered:

  • 8% national growth
  • Strong results in Perth, Brisbane and Adelaide
  • Low stock levels continuing to support competition
  • First-home buyers active thanks to the 5% deposit scheme

Melbourne and Sydney remain softer, but supply shortages elsewhere continue to put a floor under prices.

Ben will dive deeper into the property outlook in a separate update later this month.

What This Means for You

With the RBA now signalling that inflation risks remain high — and more tightening can’t be ruled out — 2026 is shaping up to be a year where being across your numbers matters more than ever.

That means:

  • Knowing your buffers
  • Stress-testing your cash flow
  • Reviewing your lending structures
  • Keeping your long-term plan front and centre

If you stay informed and stay prepared, you’ll be in a much stronger position than those reacting after the fact.

If you don’t already have an A-Team assembled, our award-winning team at Empower Wealth is always available to help.