18 September 2026
Not long ago the market had the RBA’s next move pegged as a cut. Now the consensus is another 25 basis points when the board hands down its decision on Tuesday 29 September.
What changed the picture was inflation. July’s trimmed mean came in at 3.6% against expectations of 2.8%, a year after the same measure sat at 2.8%.
“We’re talking an 80-basis point revision, which is a seismic shift over a 12-month period,” Alvia portfolio manager Daniel Martin told Stockhead’s Tim Boreham.
The bond market has been telling this story for a while. The Australian ten-year has pushed to around 5.3%, its highest in 15 years, and the US ten-year has hit 5% for the first time since 2007. The Federal Reserve lifted rates by 25 basis points last week, its first hike since 2023. Equity markets in both countries set records earlier this year and have since given ground on stubborn inflation, firmer oil and public debt levels that keep climbing.
Higher rates and higher inflation are generally bad for equities, but the damage is not evenly spread. Consumer and housing-exposed names carry the load as debt servicing costs and affordability pressures build, which puts rate-sensitive retailers, property trusts and businesses geared to discretionary spending under the most strain. Mining and energy have more room to move. Gold is the exception on the resources side, since a higher real rate sharpens the cost of holding an asset that produces no income.
Oil back above US$100 a barrel is part of the inflation problem, though not the part most people are watching. Daniel’s read on what people pay at the bowser is about refining capacity rather than the crude price. Shell is running its refineries at 102% of capacity, which means deferring downtime it would otherwise take.
“The oil price can do what it wants, but without enough refining capacity we will be paying more at the pump for longer than you expect.”
Our response to this environment is to own irreplaceable hard assets with inflation-linked contracts underneath them. APA Group is one, and its position strengthened this month when the Northern Territory government cleared it to build a pipeline into the Beetaloo Basin. Paris-listed Getlink, owner of the Channel Tunnel, is another. Tunnel patronage has softened, but the electricity interconnector its builders had the sense to include has become a reliable earner as Britain and France trade power across it.
Markets price in what they can see coming, and some of the gloom in current bond pricing reflects that. Cash is the one position inflation punishes without exception.