The Reserve Bank of Australia has just raised the cash rate by 25 basis points to 4.10% at today's monetary policy meeting — a second consecutive hike, and a signal that the RBA intends to keep policy in restrictive territory for longer than many had anticipated.
A further hike to 4.35% before year-end appears likely.
For doctors navigating property purchases, practice decisions or structural reviews, the implications are worth understanding before the next commitment is locked in.
The decision reflects a combination of persistent inflation, a tight labour market, and an economy that continues to grow faster than the RBA believes is sustainable.
Headline CPI remained at 3.8% in January, with trimmed mean inflation — the RBA's preferred measure of underlying price pressure — edging higher to 3.4%. Both remain well above the 2–3% target band. The Middle East conflict has added further upside risk through higher oil and fuel costs, which are filtering through to broader consumer prices.
At the same time, Australia's labour market is tighter than almost any comparable economy. Unemployment has declined to 4.1% — meaningfully below the RBA's estimate of the rate consistent with stable inflation. Real GDP grew 2.6% year-on-year in Q4 2025, above forecast, with public demand reaching a record share of the economy.
The RBA's message is clear: a more pronounced slowdown is needed to return inflation to target on a durable basis. The board is willing to accept some softening in labour market conditions in the second half of the year to achieve it.
1. Borrowing capacity will tighten further
Every 25 basis point increase reduces what lenders will approve. The mechanism is straightforward — lenders assess serviceability using a floor rate typically 3% above the actual loan rate. At 4.35%, that floor sits above 7%. For a GP contractor earning through a trust or company structure, the income a lender will recognise may already be lower than the headline figure. Layering rate increases on top compounds the constraint.
If a property purchase, refinance or practice-related borrowing is planned for the next 12 months, the case for acting before the next hike is stronger than it was six months ago — but only if the structure supporting that borrowing is properly set up first. Moving quickly into the wrong structure costs more than waiting.
2. Practice buy-in timing is more sensitive than it looks
For doctors considering a practice buy-in, the rate environment changes the cashflow equation significantly. A buy-in financed at 4.35% versus 3.60% — where rates were 18 months ago — represents a material difference in after-tax cashflow, particularly in the early years when income from the practice is still building.
The question worth asking now is not only whether the practice is the right opportunity, but whether the debt structure supporting the acquisition will remain serviceable if rates stay elevated through 2026. That review should happen before heads of agreement are signed, not after.
3. The tax-structure intersection is more important at higher rates
Higher interest rates change the calculus on debt-funded investment structures. The deductibility of interest, how debt is held across entities, and whether income is being recognised in the most efficient structure all carry more weight when the cost of that debt is materially higher.
For doctors who set up a trust or company structure during the low-rate period and haven't reviewed it since, now is a reasonable time to check whether the original rationale still holds. Structures that were efficient at 2% may be creating unnecessary friction — or worse, reducing recognised income — at 4.35%.
4. The higher-for-longer environment rewards preparation over reaction
The RBA's direction is clear. Rates are not coming down quickly. The doctors who tend to navigate this environment well are not those who predicted the timing of each hike — they are those who went into it with borrowing capacity properly structured, entity arrangements reviewed, and major financial commitments timed deliberately rather than reactively.
Feel free to get in touch, if a significant financial decision is approaching — property, practice, refinance, or structural review — the time to work through the implications is before the commitment, not after.
Tommy Li, CA
Director, Verity Advisory | Registered Tax Agent | Authorised Financial Adviser (ASIC Rep No. 1261831) | Member, Chartered Accountants Australia & New Zealand
Tommy is a Chartered Accountant with 20+ years advising medical professionals on tax, financial structure and practice decisions. He founded Verity Advisory to provide integrated advice for doctors at career-defining financial inflection points — combining tax, lending and financial planning into a single structured approach.
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