A Rate Cut Is in Sight — Here's What 36 Years of RBA History Says Happens Next
By Troy Baker, Director & Buyers Agent, Baker Advocates
Everyone wants to know when the RBA will cut. Fair enough with the cash rate back at 4.35% after three hikes this year, borrowing capacity is squeezed and plenty of buyers are sitting on their hands waiting for relief.
So instead of guessing, we went and looked. We took every RBA cash rate decision since January 1990 — 36 years of them — and overlaid the unemployment rate month by month. What came out isn't a prediction. It's a pattern, and it repeats with remarkable consistency.
Monthly, Jan 1990 – Jul/Aug 2026, both series on a single percentage axis. Shaded windows run from the first cut of each easing cycle to the subsequent unemployment peak. Hover to read both values at any month. Sources: RBA; ABS Labour Force; OECD/ABS via FRED.
CHART 1 — Cash rate vs unemployment, 1990–2026
The loop that runs the cycle
Strip away the noise and the last 36 years follow the same loop, over and over:
Rate hikes push unemployment up but slowly. The correlation between rate rises and rising unemployment peaks about two to three years after the hikes land. Monetary policy is a slow-release medicine, and the side effects arrive on the same delay as the cure.
Then, once the jobs market has clearly turned, the RBA reverses course. Here's the part most commentary gets wrong: there is no magic unemployment number that triggers cuts. Since 1990 the RBA has cut with unemployment at 8.6% and hiked with it at 9.4%. What actually pulls the trigger is momentum once unemployment rises roughly half a percentage point off its recent low, cuts have followed within nine months in 8 of the last 11 such episodes.
And the three times cuts didn't follow? Inflation. Every single miss — 2021, 2023, and the current 2025–26 episode — was the RBA prioritising an inflation fight over a softening jobs market. Inflation holds veto power over the loop.
At zero lead the correlation is strongly negative — policy reacting to the labour market. Pushed out 24–36 months it turns positive — the lagged bite of tightening. Hover a bar for the value. Monthly data, Jan 1990 – Jul 2026.
CHART 2 — Who leads whom: the lead–lag correlation
Where we are in the loop right now
Unemployment bottomed at 3.4% in late 2022. As of July 2026 it's 4.5% a rise of 1.1 percentage points off the low. By the historical playbook, that trigger fired long ago. In any normal cycle we'd already be several cuts deep.
Instead, the RBA did something it hasn't done in the entire 36-year record: it hiked into a clearly rising unemployment trend. The February-to-May 2026 hikes took the cash rate from 3.60% back to 4.35% while unemployment climbed from 4.1% to 4.5%. Every previous hiking cycle since 1990 began with unemployment flat or falling. This one didn't.
That tells you two things. First, the Bank sees an inflation problem serious enough to override its own reaction function. Second, the pressure building underneath is real — the labour-market deterioration that historically forces cuts is already in the data, and hikes take two to three years to fully bite, which means the 2026 tightening hasn't even started doing its damage yet.
Each timeline is anchored at the final hike of a tightening cycle (month 0) and runs to the unemployment peak. In every cycle the first cut lands mid-rise — after the trough, before the peak. In 2022–23 hiking was so fast the trough came during the hikes. (The 1990 easing is omitted — its hiking cycle predates the record.)
CHART 3 — The full sequence: last hike → trough → first cut → unemployment peak
What happens when the cuts finally come
This is the part buyers consistently misread, so it's worth being precise. In every easing cycle since 1990, the first rate cut did not mark the bottom of the labour market. Unemployment kept rising after the first cut every single time — for another 3 months in 1996, 8–9 months in 2001 and 2008, and nearly three years in the drawn-out 2011 cycle. The first cut marks the beginning of the end, not the end.
So when the headlines eventually scream "RBA cuts rates" alongside "unemployment hits new high," understand that this is not a contradiction. It's the loop working exactly as it has for 36 years.
What this means if you're buying
We're buyers agents, not economists, so here's the practical read.
The window that matters isn't the day of the first cut — it's the stretch before and around it. History shows sentiment is at its worst right when the cycle is turning: unemployment rising, headlines grim, competition thin. That's precisely when the setup for the next phase is forming. Buyers who wait for the RBA's press release to feel safe are, by definition, buying alongside everyone else who waited — and rate cuts have a way of showing up in open-home crowds within weeks.
None of this is a forecast, and it certainly isn't financial advice — the inflation veto could hold rates higher for longer than anyone likes, and every buyer's situation is different. But 36 years of data says the trigger for cuts has already fired, the only thing holding them back is inflation, and the labour-market pressure only builds from here.
If you want to talk about what this cycle means for your specific brief — where you're buying, your borrowing position, your timeline — that's exactly the conversation we have with clients every day.
Sources: RBA cash rate decisions 1990–2026; ABS Labour Force, Australia (July 2026 release); OECD/ABS harmonised unemployment series via FRED. Analysis: correlations computed on monthly data, January 1990 – July 2026 (n = 439). This article is general information only and does not constitute financial or investment advice.