Mortgage holders should expect interest rates to stay high for longer, whether or not the Reserve Bank raises them again. The RBA says intense global competition for capital from AI and data centre companies is pushing up the neutral interest rate. At 4.6%, the cash rate is the highest in 15 years, and markets have nearly fully priced in another hike by mid-2027 and do not expect rates to fall below current levels before mid-2028. Commonwealth Bank's chief economist Luke Yeaman argues that heavy government and AI spending makes rates less effective, as federal spending reached 26.9% of GDP in 2025/26, the highest in 40 years excluding COVID-19. HSBC's Paul Bloxham urged spending cuts in the mid-year fiscal update due in December.
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Related tickers and likely impact
DXY
▲ Likely positiveRelevance: low
| Market | Currencies |
|---|---|
| Close on 10/16/2026 | 101.78 |
| Change that session | -0.20% |
XAU/USD
▼ Likely negativeRelevance: low
| Market | Gold |
|---|---|
| Close on 10/16/2026 | 4,165.63 |
| Change that session | -0.13% |
BTC/USDT
▼ Likely negativeBitcoin
Relevance: low
| Market | Crypto |
|---|---|
| Exchange | Binance |
| Sector | Layer 1 |
| Market cap | $1.6T |
| Close on 10/18/2026 | 82,116.00 |
| Change that session | +0.77% |
Impact is scored by AI from the headline and may be wrong. It is not investment advice.
Related news
- Higher for longer : why low rates are relics of the past
The RBA's cash rate of 4.6% is the highest in 15 years, and markets almost fully price in another rate rise by mid-2027, with no cuts expected below current levels by mid-2028. The RBA says intense global competition for capital from AI and data centre companies is pushing up the neutral interest rate. Commonwealth Bank and HSBC economists argue that heavy government and AI-company spending makes rates less effective at reducing demand, and federal government spending reached 26.9% of GDP in 2025/26, the highest in 40 years excluding COVID-19. They urge the government to curb spending in its mid-year fiscal update expected in December, warning that otherwise the RBA will push rates harder. The term premium has climbed to a 12-year high, tightening financial conditions further.
- Higher for longer : why low rates are relics of the past
Mortgage holders should expect interest rates to stay higher for longer, whether or not the RBA raises them again on Melbourne Cup day. The RBA says intense competition for global capital from AI and data centre companies is pushing up the neutral interest rate, and assistant governor Christopher Kent said there is reasonable evidence neutral rates are rising in Australia and abroad. At 4.6 per cent, the cash rate is the highest in 15 years, and markets do not expect rates to fall below current levels by at least mid-2028. Commonwealth Bank chief economist Luke Yeaman argues that heavy government and AI-company spending makes interest rates less effective, and federal spending hit 26.9 per cent of GDP in 2025/26, the highest in 40 years excluding COVID-19. HSBC chief economist Paul Bloxham urged governments to cut spending and better coordinate with the central bank.
- Higher for longer : why low rates are relics of the past
The RBA has warned that intense global competition for capital from AI and data centre companies is pushing up the neutral interest rate, so borrowers should expect rates to stay higher for longer. The cash rate of 4.6% is the highest in 15 years, and markets see another hike by mid-2027 as almost fully priced, with no cuts expected before mid-2028. A 12-year-high term premium is also tightening financial conditions. Commonwealth Bank chief economist Luke Yeaman argues that heavy government and AI-related spending makes rate hikes less effective, so the RBA may have to hit households harder, and warns that fiscal stimulus would be a serious mistake. HSBC chief economist Paul Bloxham urges further federal spending cuts, noting federal spending hit 26.9% of GDP in 2025/26, the highest in 40 years excluding COVID-19.
- Higher for longer : why low rates are relics of the past
Mortgage holders should expect interest rates to stay higher for longer, whether or not the RBA lifts them again. The RBA says intense global competition for capital from AI and data centre companies is pushing up the neutral rate, and assistant governor Christopher Kent said there is reasonable evidence neutral rates are rising in Australia and abroad. The cash rate is now 4.6%, the highest in 15 years, and markets have almost fully priced in another rise by mid-2027, with no expected falls below current levels before mid-2028. Economists Luke Yeaman and Paul Bloxham link high government spending, at 26.9% of GDP in 2025/26 and the highest in 40 years excluding COVID-19, to weaker rate effects, and Bloxham urged further federal spending cuts.
- Higher for longer : why low rates are relics of the past
Mortgage holders should expect interest rates to stay high for longer, whether or not the RBA lifts them again. The RBA says intense global competition for capital from AI and data centre firms is pushing up its estimate of the neutral rate, and Assistant Governor Christopher Kent said there is reasonable evidence neutral rates are rising in Australia and abroad. At 4.6%, the cash rate is at its highest in 15 years; markets have scaled back bets on another hike, but a rise by mid-2027 is nearly fully priced in, and no fall below current levels is expected before mid-2028. Heavy government and AI-related spending may be reducing the effectiveness of rates, forcing the RBA to hit households harder, and Luke Yeaman of Commonwealth Bank warned that more government spending would be a serious mistake. HSBC's Paul Bloxham urged further federal spending cuts, as federal spending reached 26.9% of GDP in 2025/26, the highest level in 40 years excluding COVID-19.
- RBA extreme interest rates push economy towards potential recession
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