Australia's January CPI at 3.8%: What the Next RBA Rate Decision Means for Borrowers

Australia's January CPI at 3.8%: What the Next RBA Rate Decision Means for Borrowers

The Australian Bureau of Statistics (ABS) confirmed that the Consumer Price Index (CPI) rose 3.8% in the year to January 2026, remaining above the Reserve Bank of Australia's (RBA) target band of 2–3%. With the RBA's next scheduled cash rate decision on 17 March 2026, this inflation data will be a central factor in the Bank's deliberations.

The current cash rate stands at 3.85%, following the RBA's 25 basis point cut in February 2026 — the first reduction in several years. Whether the RBA will deliver a second consecutive cut depends heavily on whether inflation continues to moderate.

Key Factors to Watch Before 17 March

1. Services Inflation Remains Sticky

While goods inflation has eased, services-driven price increases — including rent, insurance, and childcare — continue to push the headline figure above target. The RBA has flagged services inflation as its primary ongoing concern.

2. Labour Market Resilience

Strong employment data alongside average weekly earnings of approximately $2,051 (ABS, November 2025) suggests consumer spending power remains elevated. This acts as a potential headwind for further rate cuts, as strong wages can sustain inflationary pressure.

3. Global Factors

International trade uncertainty and fluctuating global commodity prices will also influence the RBA's assessment of the domestic inflation outlook heading into March.

What This Means for Different Types of Borrowers

Variable-Rate Mortgage Holders: A second RBA rate cut in March would provide further monthly repayment relief. However, with CPI still at 3.8%, a cut is far from guaranteed — borrowers should plan for both scenarios.

Fixed-Rate Loan Applicants: If you are considering locking in a rate, current fixed rates from non-bank lenders may offer competitive options before any potential market repricing.

Self-Employed Borrowers Using Alt Doc Loans: The inflation environment has a subtler effect on this segment. Lenders are recalibrating their serviceability assessments, and non-bank lenders — who typically use BAS statements, accountant letters, or 6–12 months of business bank statements — continue to offer a practical pathway for borrowers whose income is more complex.

MPFG's Perspective

At MPFG Capital, we work with borrowers across the interest rate cycle. Whether rates fall in March or hold steady at 3.85%, our Alt Doc and non-bank lending solutions are designed for borrowers whose income doesn't fit neatly into a payslip — from restaurant owners and tradies to freelancers and small business operators.

If the inflation data or upcoming RBA decision has affected your borrowing confidence, speaking with a specialist non-bank lender can help clarify your current options.

This article is for informational purposes only and does not constitute financial advice. Borrowers should seek independent financial guidance before making lending decisions.

Data source: Australian Bureau of Statistics (ABS), Reserve Bank of Australia (RBA)