RBA holds at 4.35%, keeps hikes on the table

Monetary PolicyRBA holds at 4.35%, keeps hikes on the table

As all but universally expected, the RBA Monetary Policy Board held the cash rate steady at 4.35% at its June meeting, a unanimous decision as the three hikes delivered earlier this year continue to feed through the economy. The Board explicitly signalled that further hikes remain firmly on the table.

• The closing line of the statement added the clause ‘including increasing the cash rate target further if required’, a point that Governor Bullock reinforced again at the press conference. This unusually firm drafting reads as a deliberate effort to hose down recent speculation that the tightening cycle is complete.
• The Board reiterated that inflation is too high and that a period of below-trend growth is needed to return it to target. With the economy seen able to grow only around 2% before capacity pressures build, policymakers were not spooked by softer household and labour data, regarding the labour market as still a little tight.
• The energy price shock is viewed as adding to a pre-existing inflation problem, with commodity prices still above pre-war levels and the recovery expected to be only gradual. Notably, the tone on cost pass-through hardened, with the Board now seeing ‘signs’, rather than ‘early signs’, of firms lifting prices, especially in new housing construction.
• Westpac retains its view that further increases are coming. Should the June-quarter trimmed mean inflation print strong, the next hike could land as soon as the August meeting.

Consumer ConfidenceConfidence falls 0.1pts

Tax ReformCGT carve-outs for start-ups and small business

• The Government unveiled a package of capital gains tax carve-outs on 18 June, easing the backlash to its Budget tax changes. The existing 50% active-asset CGT reduction will be extended by lifting the turnover threshold from $2 million to $10 million, bringing all 2.7 million active small businesses, or 98% of active businesses, into scope.
• A new Innovative Business CGT Concession will preserve a 50% discount for early-stage investors, founders and employee share scheme participants of start-ups. Eligible firms must be under 10 years old, under $50 million in turnover and meet innovation criteria, with shares held for five years, for gains accrued from 1 July 2027.
• The Government also scrapped a proposed 30% minimum tax on discretionary testamentary trusts, labelled a ‘death tax’ by critics, reversing a plan that would have lifted the top effective CGT rate toward 47%. Treasurer Chalmers framed the more than $3.8 billion package as backing innovation.

Foreign ExchangeAUD above 0.70 but USD firms on hawkish Fed

• The Australian dollar rose above US$0.70 but remained near two-month lows as the US dollar jumped following the Federal Reserve’s interest rate decision. While the Fed left its policy rate unchanged, half of FOMC members now expect a hike later this year amid growing inflation concerns.
• New Fed Chair Kevin Warsh shifted away from forward guidance in his debut communication, emphasising a more inflation-focused policy stance.
• In Australia, the Reserve Bank signalled further tightening after holding rates steady. Governor Michele Bullock stressed that inflation remains too high and reiterated that further hikes cannot be ruled out. Although markets increasingly suspect the tightening cycle is over, the RBA’s hawkish tone has kept roughly 50% odds of one final hike this year priced in.
• Elsewhere, US President Trump signed an interim agreement to end the war with Iran, though it remains uncertain whether Iran has begun steps to fully reopen the Strait of Hormuz.

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Sources: RBA June 2026 Monetary Policy Decision, Westpac Economics (Weekly, 15 June 2026), Australian Government Budget announcements, ANZ-Roy Morgan. This summary is for informational purposes only and should not be considered financial advice. Always consult a professional before making investment decisions.