The RBA Has Lifted the Cash Rate to 4.85%, the Highest Since 2008, and HIA Says New Home Sales Are at an 18-Month Low. Here's How Builders Should Protect Cash Flow.

The cash rate is back at an 18-year high

The Reserve Bank of Australia raised the cash rate target by 25 basis points to 4.85 per cent on Tuesday 3 November, effective Wednesday 4 November. It is the RBA Board's latest decision and, as HIA and Master Builders both pointed out, the highest cash rate since November 2008.

The decision was not unanimous. The RBA said six members voted to increase the rate and three voted to leave it unchanged at 4.60 per cent.

| Item | What the RBA said | | --- | --- | | Decision | Cash rate target up 25 basis points to 4.85% | | Vote | Six members for the rise, three to hold at 4.60% | | Inflation outlook | Expected to stay above 3% until the end of 2027 | | Housing | Higher rates and falls in housing prices and turnover are expected to weigh on dwelling investment | | Next decision | 8 December 2026 |

Sources: RBA media release 2026-30 and Statement on Monetary Policy, November 2026; RBA decision date as listed in the ACT Treasury's cash rate summary.

The RBA said the economy is slowing, housing prices have fallen significantly and the unemployment rate has risen. It also said the inflation outlook has been revised materially higher, partly because of higher fuel and commodity prices tied to the Middle East conflict.

What HIA said

HIA Managing Director Jocelyn Martin called it the RBA's fifth rate hike this year and said it "puts the nation further away from achieving its home building targets".

Martin said that on the current trajectory Australia is expected to fall around 200,000 homes short of the 1.2 million new dwellings set by the National Housing Accord.

She said the impact is already showing up in leading indicators: new home sales in the September quarter 2026 remained at their lowest level in 18 months. Other indicators such as new housing finance and approvals have yet to slow because of earlier built-up work in the pipeline, she said, but as that pipeline shrinks "the industry is set to deliver fewer homes than otherwise".

Martin also argued that structural affordability depends on the cost of delivery, and called on all three tiers of government to cut taxes, infrastructure charges, regulatory costs and delays on new housing. She also pointed to foreign investor surcharges and higher taxes on housing investment as barriers to the capital that funds supply.

What Master Builders said

Master Builders Australia said the rise lands on a difficult backdrop for builders and tradies:

• Building materials inflation is at a three-year high.
• Apprenticeship numbers have fallen to a five-year low.
• The cost of building a new home has risen by 53 per cent since the pandemic.
• Delivering new roads and bridges costs 33 per cent more.
• Non-residential building costs have climbed almost 40 per cent.

Master Builders said these pressures combined with historically high interest rates "erode the financial case for projects to proceed", and that construction forecasts have been downgraded.

It also said it will appear before the Senate committee examining the trust legislation on Thursday (5 November) to oppose the proposed changes, which it says would hit more than 90,000 construction businesses.

The desk moves for builders

The pipeline HIA describes is still carrying work, but the leading indicators say new work is thinning. Here's what to check on your own books. This is general information, not financial advice, so talk to your accountant or finance broker before changing facilities or contract terms.

1. Stress-test client finance on every job not yet started. Higher repayments can change a client's borrowing capacity between contract signing and finance approval. Check which contracts have finance conditions still open, and when those conditions lapse.

2. Keep an eye on progress claim timing. If clients are drawing on construction loans, a late bank valuation or progress payment hits your cash flow first. Send claims promptly and chase overdue invoices early.

3. Review your own debt. If you carry variable-rate business finance, equipment finance or a spec-build facility, ask your lender or broker what the new rate does to your repayments and covenants, and budget for it.

4. Count the holding cost on any spec or stock-in-hand. With HIA reporting new home sales at an 18-month low, unsold stock costs more to carry at 4.85 per cent. Revisit your sell-through assumptions.

5. Shorten quote validity where you can. The ABS input cost data released last week showed electrical and plumbing costs rising fast. A shorter validity window on quotes limits how long you carry the risk.

6. Don't let a thinner pipeline become a gap. HIA says approvals and finance haven't slowed yet. Use the lead time to firm up your next six months of starts and talk to your key subcontractors early.

7. Watch the trust tax debate. If your business operates through a family or unit trust, the Senate committee hearing this week is worth following. Master Builders has argued for grandfathering or a small business carve-out. Get advice from your accountant before restructuring anything.

What to watch next

The RBA's next decision is on 8 December. HIA's next set of new home sales and approvals data will show whether the lag it describes is catching up with the pipeline, and the Senate committee's handling of the trust legislation will matter for any builder operating through a trust.

Sources: RBA, Statement by the Monetary Policy Board, 3 November 2026; RBA, Statement on Monetary Policy, November 2026; HIA, "Higher rates, fewer homes", 3 November 2026; Master Builders Australia, 3 November 2026; ACT Treasury, Official Cash Rate Decision, 3 November 2026. This article is general information, not legal or financial advice.