by Dejan Pekic
Update on Interest Rates
Posted by Dejan Pekic
Interest rates are once more heading up. Reserve Bank of Australia (RBA) has adopted a more measured approach, with the cash rate currently around 4.10%.
While it may feel like rates have only moved upward, they are cyclical. In 1991, the RBA cash rate was 12%. By December 2001, it had fallen to 4.2%, before rising again to 7.25% in 2008. In November 2020, it reached a historic low of 0.10%.
Rate movements are never linear and fluctuations are normal. While current levels are near recent highs, they remain consistent with past cycles.
Rate percentages don’t move in a straight line and fluctuations are typical. Remember, too, that while the cash rate fell to 3.6% in August last year, we are still sitting below the last peak of 4.35% in November 2023.
Recent increases were driven by inflation rising above the RBA’s 2–3% target, alongside strong consumer spending, housing demand and business investment. As inflation begins to ease, the RBA is responding more cautiously.
Fluctuations in the cash rate do impact investments. Over the past 30 years, there have been two periods of rapidly rising interest rates linked to a market crash (a fall of 20% plus). These occurred during the bond market crash of 1994 and the 2000 dotcom bubble. Conversely, the 2008 global financial crisis was followed by a rapid rise in interest rates.
So, what will happen now?
The key financial trends for 2026 suggest that even with the possibility of further rate hikes, we may continue to see modest economic growth, a stable labour market and strong ASX returns, particularly among the real estate, utilities and tech sectors.
There are no certainties with financial markets, which is why we recommended a diversified investment strategy in line with your appetite for volatility. At Newealth, we can help you plan with clarity and confidence, and find opportunity, wherever the economy takes us.
General Advice Warning:
The information in this blog is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether the information is appropriate for you and seek professional advice before making any financial decisions.
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