‘Cautious and predictable’: Struggling homeowners | Australian Markets

Westpac says the Reserve Bank of Australia will keep charges on maintain after they subsequent meet in July, regardless of weak client spending and falling financial growth.

The huge 4 bank has bucked money markets predictions, that are at present factoring in an 84 per cent likelihood of a price cut in July, saying the RBA will probably be “cautious and predictable”.

Westpac chief economist Luci Ellis, a former assistant RBA governor, expects simply two more price cuts this yr, coming in August and November, saying the market is getting forward of itself.

“The (RBA) board described itself as having a preference to move cautiously and predictably,” she wrote in an financial notice.

“This is code for not wanting to do back-to-back cuts.

“It also made it clear in the minutes that this was about reducing restrictiveness, not moving quickly back to neutral in the style of the Federal Reserve last year.”

While homeowners could need to attend, Ms Ellis agrees with the bulk of the market that rates of interest ultimately will fall under 3 per cent.

To get so far, Ms Ellis expects price cuts will are available in February and May 2026, although the central bank may also transfer in December ought to more Australians lose their jobs.

According to the economist, the RBA will look to keep inflation below control over attempting to provide the economic system a fast leap.

“Nothing that has happened since (the May meeting), including a disappointing GDP number, has been enough to tip the RBA into changing its mind in the near term,” Ms Ellis mentioned.

NED-9175-Australia’s GDP

These figures launched earlier within the month, confirmed GDP growth for the March quarter got here in at simply 0.2 per cent, decrease than market forecasts.

In May the RBA diminished Australia’s GDP forecasts for the 2025 calendar yr from 2.4 per cent to 2.1 per cent.

But AMP deputy chief economist Diana Mousina disagrees, saying the weaker than anticipated GDP figures will see the Reserve Bank cut charges.

“The weakness in the March quarter GDP data pushed us to now expect another 0.25 per cent rate cut in July (as well as August, November and February 2026),” she beforehand wrote in an financial notice.

“This is similar to market pricing at the moment.”

Commonwealth Bank senior economist Belinda Allen additionally believes there could possibly be a price cut in July, if financial knowledge is available in decrease than the RBA forecasts.

“The progression of consumer spending data will be a key focus for the RBA ahead of the 8 July rate decision,” she mentioned.

“The balance of probabilities continues to shift towards a July rate cut (our base case remains August) but will depend on upcoming data flow including the May monthly CPI and labour market data.”

In a silver lining for households, Ms Ellis believes May’s jobs knowledge popping out subsequent week will show the present jobs market is tighter than the RBA’s view of full employment, which means more Aussies may have a job.

Unemployment Figures

Ms Ellis mentioned trying long term, the case for a number of price cuts is building as inflation shifts within the face of slower population growth and shakier personal sector demand.

“Recent data has made it clear that population growth is unwinding a bit faster than previously thought,” she mentioned.

“We have assessed that this is enough to have implications for housing costs, particularly rents.

“Over time, this puts a little more downside into measures of underlying inflation. We are also seeing a bit more downside in some parts of services inflation.”