Key points:

• The Reserve Bank (RBA) lifted the cash rate to 4.60% in September, its fourth rise this year, to bring inflation back to its 2–3% target.
• Inflation was 4.0% in the year to August 2026, driven mainly by housing and fuel costs, with the RBA also pointing to pressure on the economy’s capacity.
• August reporting season was steadier for Australia’s largest companies than day-to-day share price moves suggested.
• Markets wobbled in mid-October on concerns about AI-related valuations, but the S&P/ASX 200 still finished the week of 16 October higher.
• Dividends can rise and fall with company profits, but over the long run Australian companies have paid a consistent share of their earnings to shareholders.
• Short-term volatility is a normal part of long-term investing.

It has been a year of rising interest rates.

The Reserve Bank of Australia has lifted the cash rate four times in 2026, most recently to 4.60% on 29 September, because inflation has stayed stubbornly above its 2–3% target. Annual inflation dipped to 1.9% in mid-2025, climbed to a peak of 4.6% in March 2026 as fuel prices jumped after the Middle East conflict escalated, and was 4.0% in the year to August 2026.

Housing was the biggest contributor, with higher costs for new homes and electricity. Transport came next, with fuel prices rising 14.8% in August alone as world oil prices climbed and the last of the government’s fuel excise relief ended. The RBA has also pointed to strong global demand for AI-related goods, and to an economy running close to its limits, as reasons price pressures have lingered.

Against that backdrop, Australian shares have held up better than the headlines might suggest. Morningstar’s review of the August reporting season found analysts raised their valuations for 45 companies and lowered them for 29, with most of the weakness on results day concentrated among smaller companies.

Australia’s largest companies generally delivered results in line with expectations. Share prices did drift lower into September, which the RBA linked to softer profit expectations for banks, property and retail. Then in mid-October a global sell-off in technology and chip stocks, sparked by concerns about the cost of building out artificial intelligence, briefly spilled over to our market. By Friday 16 October, though, the S&P/ASX 200 had recovered to 8,806.7, its third straight week of gains, helped by a rebound in miners and solid gains in financials and consumer staples.

For investors who rely on dividends, the recent picture has been encouraging. Analysis published on the ASX website found that the total value of dividends declared by S&P/ASX 200 companies in the August reporting season was up 13% on a year earlier. Around two in three companies raised their dividend and 10% held it steady, while 24% cut it.

That mix is a reminder that dividends do move up and down with company profits. Some large miners trimmed payouts between 2022 and mid-2026 as commodity prices eased, before lifting them again this year. But the longer-term record is reassuring. RBA research covering more than a century of Australian share market history found listed company profits grew by an average of around 10% a year from 1937. It also found companies paid out around 65% of their earnings as dividends on average from 1917, and it was rare for large companies to stop paying dividends for any material period.

So what can investors expect from here? No one can reliably predict the next interest rate decision or where markets will move in the coming weeks, and the RBA itself has flagged that a change in sentiment about the AI boom could unsettle global markets. Further bouts of volatility are possible. The government’s Moneysmart website notes that short-term ups and downs happen often in share markets, that markets have moved through many cycles of rises and falls over long periods, and that selling during a fall can ‘lock in’ losses.

At Mandate Financial Planning, we invest for the long term. We focus on the income that quality companies pay out over time and on the growth of those businesses, not on the headlines of any given week. Key dates to watch are the September inflation figures on 28 October and the RBA’s next decision on 3 November, which markets are so far pricing as a 50/50 of another rate rise.

If you’d like to talk about how recent events relate to your own situation, please feel free to get in touch.

General Advice Warning: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, Mandate Financial Planning and Futuro Financial Services Pty Ltd do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, Mandate and Futuro do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.