RBA Holds Cash Rate at 4.35%: What It Means for Borrowing

A second consecutive hold at 4.35% means the safer planning assumption for business and investment borrowing is that this rate holds for some time, not that a cut is close. At its most recent meeting, on 11 August 2026, the Reserve Bank Board left the cash rate target unchanged, following three separate 25 basis point increases earlier in the year, in February, March and May. For anyone weighing up a business loan, a refinance or an investment property purchase, that matters more than the number itself.

How the year got here

The RBA raised the cash rate three times in quick succession earlier in 2026 in response to inflation that had picked up more than expected. Since then, the Board has held at both its June and August meetings. In its August Statement on Monetary Policy, the RBA noted that headline inflation eased in the June quarter, but underlying, trimmed mean inflation remains elevated and is little changed from where it sat in the March quarter. Inflation had also picked up materially in the second half of 2025, with part of that increase put down to capacity pressures in the economy rather than a temporary spike, which is part of why the Board moved as quickly as it did earlier in the year.

A hold is not a signal that cuts are coming

It is tempting to read two holds in a row as the start of a downward path, but that is not what the RBA has said. The Board has explicitly flagged that it would raise rates again if upside risks to inflation materialise. A hold means the current rate is doing its job for now, not that the next move is necessarily down. Treating a pause as a promise of cuts is the kind of assumption that can leave a financing decision worse off if it turns out to be wrong.

What this means for financing decisions

With trimmed mean inflation still elevated, the more useful planning assumption for now is that 4.35% is close to the level borrowing costs will sit at for some time, rather than a peak about to fall away. That has practical implications for a few common decisions:

• Fixed versus variable: if a rate cut is not imminent, the case for locking in a rate to remove uncertainty is different than it would be heading into an expected cutting cycle.
• Timing an asset purchase: waiting for lower rates before settling on a business asset or investment property assumes a cut that the RBA has not signalled is close.
• Cash flow modelling: business plans and investment property cash flow forecasts built on an assumed rate cut should be stress-tested against the rate simply staying where it is.

The tax side of a borrowing decision

Interest on money borrowed for an income-producing purpose, whether that is a business loan or an investment property, is generally deductible, but the deduction is only as good as the planning behind it. Higher-for-longer borrowing costs change the relative appeal of, for example, paying down debt against a private asset first versus an investment asset, and change how much buffer a negatively geared property needs to carry. Business owners borrowing from their own company should also watch the Division 7A benchmark rate, which moves with the cash rate cycle. These are decisions worth modelling properly rather than assuming last year's numbers still hold.

A negatively geared property that comfortably covered its shortfall at last year's borrowing costs may need a larger cash buffer to keep doing so at this year's rate, particularly for anyone on a variable loan who has already absorbed three increases this year on top of whatever the rate was before them. Reviewing the buffer now, rather than when a shortfall actually bites, is the more useful order to do it in.

What to watch next

The RBA's next meeting is in September. Whatever is decided there will say more about the medium-term path than this single hold does on its own. Businesses and investors with financing decisions in train should treat the current rate as the planning baseline until the RBA actually signals otherwise, rather than building a decision around a cut that has not been announced. A third consecutive hold would strengthen the case that the cycle has genuinely paused; a further increase would confirm the Board's own warning that upside inflation risk is still live.

Plan the decision, not the guess

Borrowing decisions made on a guess about where rates are headed are harder to unwind than ones made against the rate that is actually in front of you. If you are weighing up finance for a business purchase, a refinance or an investment property, we can help you model it against the current rate rather than a hoped-for one.

Disclaimer: This article contains general information only and does not constitute financial, legal or tax advice. It has been prepared without regard to your objectives, financial situation or needs. Tax and superannuation laws change frequently, and the information in this article may not reflect the current law or may become inaccurate over time. Before acting on anything in this article, you should consider its appropriateness to your circumstances and seek advice from a registered tax agent or qualified adviser.