On Tuesday 3 February 2026, The Reserve Bank of Australia (RBA) increased the official cash rate by 25 basis points to 3.85%. This marks the first rise in more than two years which reflects an economy that is growing.
Inflation reached 3.8% in the year to December 2025, sitting above the RBA’s 2–3% target range, not because the economy is struggling but because demand, employment and activity remain strong nationwide. Australia’s population growth, business investment, and housing demand have all been contributing to this uplift, prompting the RBA to make a measured adjustment to keep inflation anchored.
Why the RBA moved
In its statement, the RBA highlighted that capacity pressures are building across the economy – a sign of confidence and activity. Household spending is solid, business investment continues to strengthen, and housing activity remains elevated. The labour market is still tight, with unemployment lower than expected and demand for workers remaining healthy.
This rate adjustment is designed to keep the economy balanced, not slow it dramatically. It reflects the RBA’s commitment to maintaining sustainable growth while ensuring inflation returns to target in an orderly way.
What it means for our households, businesses and investors
Instead of viewing this as a setback, it’s helpful to see the increase as a natural recalibration within a growing economy.
- Households may see an increase in mortgage repayments, but this sits within a broader environment where employment remains strong and property values continue to hold up due to limited supply.
- Businesses may face slightly higher borrowing costs, yet healthy consumer activity and strong demand continue to support many sectors.
- Investors and self-funded retirees may benefit from rising returns on savings, term deposits and funded retirees’ income-based assets as rates adjust upward.
The Perth property market: still leading the nation
Perth continues to stand out as one of Australia’s strongest and most resilient property markets heading into 2026. The city recorded 2% monthly growth in January, and 18.5% annual growth, outperforming every other capital. This momentum reflects not just buyer confidence, but the underlying structural forces shaping Western Australia’s housing landscape.
Finance Broker Jarrod Read from Boutique Finance Group explains that Perth’s performance is no accident:
“It’s a common belief that rising interest rates automatically lead to falling property prices, but the Australian market has shown time and time again that supply and demand fundamentals matter more. While affordability tightens, the reality is that record low listings, construction delays and sustained population growth are keeping upward pressure on prices. Demand continues to exceed supply, and that imbalance isn’t going away anytime soon.”
Perth demonstrates this dynamic more clearly than any other market. With listings at historic lows and population growth continuing to surge, structural undersupply remains the dominant force, outweighing the dampening impact of higher borrowing costs.
Jarrod adds: “As rates rise, some buyers may shift toward more affordable segments like apartments, townhouses and villas, but overall property growth is still likely to continue because the structural housing shortage remains the key driver.”
For buyers, this means opportunities still exist, particularly in more affordable or higher density segments where competition remains strong, but price points are more accessible.
For homeowners and investors, Perth’s trajectory reinforces its position as a resilient, growth-oriented market, density segments where competition remains, supported by fundamentals that remain well intact for 2026 and beyond.
Guidance for the road ahead
In times of uncertainty, the real advantage lies in having a well‑structured plan that positions your wealth for the next phase of the cycle – whatever direction rates take from here. Forecasting the next move matters far less than ensuring your strategy is resilient, adaptable and aligned to your long‑term goals.
With rising rates influencing decisions, now is an ideal time to refresh your financial plan and ensure your strategy is aligned for the next phase of growth. We are here to help clients navigate periods like this with clarity and confidence. Speak to your Adviser or book a complimentary call if you are a new client.
