SYDNEY, AUSTRALIA - NewsWire Photos - 09 DECEMBER 2025: RBA Governor Michele Bullock gives a statement after the RBA's Monetary Policy Decision to keep interest rates on hold. Picture: NewsWire / Christian Gilles
UPDATE: Aussie travellers may soon enjoy a boost in purchasing power as the Reserve Bank of Australia (RBA) is expected to hike interest rates before mid-2026, potentially strengthening the Australian dollar. This comes as the RBA diverges from the Federal Reserve, which just lowered interest rates to a range of 3.5% to 3.75% last week.
The widening split between these two central banks has ignited speculation that overseas investors will flock to Australia for better returns. Investment bank UBS predicts that similar historical trends could see the Aussie dollar increase by 10% to 40%, providing a significant advantage for Australians planning international travel.
UBS economist George Tharenou noted, “The Australian economy is outperforming or stronger than the United States across key macrovariables of GDP, inflation, and the labour market.” He emphasized that the RBA is likely to raise the cash rate while the Fed continues its cuts. However, the exchange rate has not yet adjusted upward as anticipated, partly due to superannuation funds increasing investments overseas.
Analyst Shane Oliver from AMP forecasts that the Australian dollar’s fair value could rise by about 7 cents, estimating it should reach around 73 US¢, compared to approximately 66 US¢ on Monday morning. A stronger dollar could modestly lower import prices for essentials like fuel and electronics, but it poses challenges for Australian businesses competing in global markets.
As the RBA’s interest rate strategy unfolds, the implications for Aussie consumers and businesses are significant. The potential for a stronger dollar may mean cheaper holidays abroad, but it could also tighten the competitive landscape for local enterprises.
Stay tuned for more updates on this developing situation, as the RBA’s decisions and their effects on the Australian economy will be closely monitored in the coming months.
