Economic Watch — Week Ending 2 October 2026
Rates
The Board moved. On Tuesday 29 September it increased the cash rate target by 25bp to 4.60% — effective 30 September, and the fourth hike of the year. The trail it now stands on:
- 4 Feb 2026 — +25bp to 3.85%
- 18 Mar 2026 — +25bp to 4.10%
- 6 May 2026 — +25bp to 4.35%
- 17 Jun 2026 — hold at 4.35%
- 12 Aug 2026 — hold at 4.35%
- 30 Sep 2026 — +25bp to 4.60%
The statement was hawkish on its own terms. The Board's stated driver was risk materialisation, not fresh conviction: "some of the upside risks to inflation are materialising" — further disruptions to global oil supply, growth and inflation higher than expected, fuel pass-through into the wider basket, all on top of existing capacity pressures. And the forward language was explicit: a further tightening "is warranted", and the Board "will continue to do what it considers necessary… including increasing the cash rate target further if needed."
The front end's answer is the week's real print. The AU 2-year closed 4.942% on 30 September — the day the hike took effect — flat on the week (−0.5bp) and +21bp on the month. That takes the premium over cash from ~60bp to ~34bp. Read it precisely: the delivered hike consumed the premium, and the market declined to pay for the follow-through the statement explicitly threatened. A Board saying "more if needed" met a 2-year that answered "show me."
The long end went the other way. The 10-year printed 5.344%, +10bp on the week and +18bp on the month, steepening 2s10s from +30bp to +40bp. The curve's shape is the tell: the policy leg compressed while the duration leg extended — a bear-steepening that says the market isn't disputing the next hike so much as refusing to pay for it up front, while charging more for everything beyond it.
The US leg kept grinding. The 10-year closed Friday at 5.28% (+9bp on the week) with the effective funds rate at 3.88% (1 October, NY Fed). The sharpest mark is the 13-week bill: 3.99 Friday, eased from 4.07 — last week's through-the-top print trimmed back to the 4.00 line. The bill market still leans toward October's FOMC (27–28) delivering, but a notch softer than it did a week ago.
Housing
Friday closes, 2 October:
| Close | Day | Week | |
|---|---|---|---|
| GMG | 25.91 | -2.6% | -1.8% |
| SGP | 4.11 | -1.0% | +2.2% |
| SCG | 3.35 | -1.8% | -0.9% |
| VCX | 2.27 | -2.6% | 0.0% |
| MGR | 1.78 | -0.6% | +3.8% |
| GPT | 4.44 | -0.5% | +0.7% |
| JHG | 36.07 | -0.4% | -2.5% |
| CBA | 151.45 | +1.2% | +0.4% |
| WBC | 34.32 | +1.2% | -0.5% |
JHG — the quote continues to answer under its JHX line on the ASX; the data-feed gap under the JHG symbol persists, so the JHX print is the reference (36.07 Friday).
The week was a round trip with the event in the middle. Wednesday 30 September — the first close after the decision — was the refund session, on cue: every levered domestic name ripped, MGR +4.8%, SGP +4.6%, GMG +3.9%, VCX +3.5%, GPT +2.9%, SCG +2.6%, on an index up just 0.9%. That was the pre-payment collecting its bounce, exactly the relief-path mechanics in place before the event — the premium compressing toward cash+30bp while the complex cashed four weeks of discount.
Thursday took it straight back. The index fell 2.0% to 8614 — the biggest daily drop of the repricing run — with WBC down 3.3% on no dividend in the feed (a genuine print, not an ex-div adjustment), GMG −2.2%, and VCX and GPT completing full round trips to unchanged on the week. Friday stabilised: index +0.8%, both banks bid (+1.2% apiece), but GMG fell another 2.6% — the US-linked names did not join the recovery.
The composition now splits cleanly along the discount-rate line. The levered domestic complex kept the week's gains — MGR +3.8%, SGP +2.2%, GPT +0.7% — because Wednesday's rip carried them. The US-linked names lagged: GMG −1.8%, JHG −2.5%, SCG −0.9%. Cumulatively since the repricing began on 4 September: JHG −12.6%, VCX −10.6%, SGP −6.8%, GMG −6.0%, SCG −5.9%, CBA −5.6%, GPT −3.7%, MGR −3.0%, WBC −1.8% — against an index down 3.6%. The pre-payment was partially refunded Wednesday and re-issued Thursday; net, the complex still carries 3–13% of discount against a market down less than 4.
Context
- ASX 200: 8682 Friday, +0.8% on the day and +0.2% on the week — but the path matters: +0.9% Wednesday through 8789, then −2.0% Thursday to 8614, the run's biggest daily drop, then a partial Friday recovery; Monday morning 8715
- AUD/USD: 0.6929 Friday close, −1.1% on the week and −3.8% since 4 September — lower every session after the decision (0.702 → 0.699 → 0.695 → 0.693); the hike bought the currency nothing; Monday morning 0.6954
- AU–US 10-year spread: ~+5bp on matched 30 September vintages (5.344% vs 5.29%), ~+7bp on latest prints (US 5.277% Friday) — the AU table has not yet answered Thursday and Friday's US sessions
- Policy differential: RBA cash 4.60% vs Fed funds effective 3.88% — +72bp, from +47bp a week ago
- Next RBA: minutes 13 October; next decision 2:30pm AEDT Tuesday 3 November (Statement on Monetary Policy same day), then 8 December; the last CPI print before the November meeting is the monthly indicator, 28 October
- Next FOMC: 27–28 October, no SEP — a week before the RBA's November decision
- Data vintage: AU yields are RBA F2's 30 September print; equities are Friday's ASX close; the fed funds effective rate is 1 October; FX is Friday's close
Eva's Read
Last week I sketched three paths off the decision. The market took the relief path's mechanics and none of its spirit. The premium compressed to ~34bp over cash — almost exactly the cash+30bp I marked — and Wednesday's session was the refund, four weeks of pre-payment cashing out at +3–5% across the levered names. But two deviations broke the script. The AUD was supposed to take back some of its losses on a hike; instead it fell a third straight week, lower every single session after the decision — the currency is pricing something the front end isn't. And Thursday's −2.0% index session took the refund straight back, with no domestic catalyst in the data to explain it. A bounce that survives one session is positioning closing out, not a floor forming.
The unresolved tension is now explicit. The Board put "further if needed" in writing — oil, pass-through, growth and inflation "higher than expected" — and the 2-year refused to price it, holding at 4.94 while the 10-year steepened the curve to +40bp. Either the front end is too cheap or the statement is event language. The 13-week bill trimming to 3.99 off last week's through-the-top print says the US leg of the tightening trade is, one notch at least, easing ahead of the 27–28 October FOMC — which lands a week before Australia's next CPI (28 October) and two weeks before the Board's next decision (3 November).
So the marker order is: minutes 13 October (the vote and the conviction behind "if needed"), FOMC 27–28 October, CPI 28 October, Board 3 November. If the oil-and-pass-through language is showing up in the CPI prints, the 2-year's 34bp is a discount and the second leg comes — back through 5.00%, and a complex still carrying 3–13% of pre-payment gets re-charged. If it isn't, the statement was the event's costume, the premium compresses toward zero, and the trade becomes the AUD's problem instead. One week in, the Board has the language and the market has the doubt — the data settles it.
— Eva