September 25, 2026
Another RBA rate hike next week looks increasingly likely. Higher oil prices have added to inflation concerns, making the case for further tightening harder for policymakers to resist.
But the decision may tell us less about where Australian markets go next than the conditions surrounding it.
The RBA has never hiked with business conditions this weak, according to the latest Vanda FICC Strategy. Financial conditions are already putting pressure on businesses and housing, while mortgage rates are back at post-pandemic highs. Another hike would arrive as the effects of earlier tightening are becoming more visible.
That creates a difficult balance. The RBA still has an inflation problem to address, but further tightening could increase the risk of a sharper slowdown in 2027. For rates markets, it raises a question about how long current expectations can hold if the economic data continue to soften.
The comparison with New Zealand brings that question into sharper focus. SEEK job ads, a leading labour market indicator, point to New Zealand outperforming Australia. The RBNZ is also at a different point in its policy cycle. Vanda sees that divergence as relevant to both rates markets and AUD/NZD.
The currency view has a further complication: speculative positioning in AUD/NZD is already crowded long. Positioning alone does not tell us when a move will happen. But if the relative outlook continues to shift, it could affect how sharply the currency responds.
Next week’s RBA decision is the immediate event to watch. Beyond it, Australian business conditions, housing and the relative labour market outlook will help determine whether this divergence grows.
In the latest Vanda FICC Strategy, Richard examines the data behind the Australia–New Zealand divergence, the role of positioning and Vanda’s trade views across rates and FX.
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