Most economists certain the RBA will move to cut interest rates – but can’t agree on how much
Economists expect the Reserve Bank to cut rates today, potentially saving homeowners thousands in mortgage repayments. We asked 26 experts how low it could go.
After being caught off-guard by a “soul-crushing” hold on interest rates last month, Australian economists have overwhelmingly tipped the Reserve Bank of Australia will cut the cash rate today.
But the jury is out on how low it could go.
Homeowners were left frustrated in July after the Reserve Bank announced its decision to leave the cash rate unchanged despite a cut being widely tipped.
The RBA’s last decision was made as the board opted to wait for inflation data before pulling the trigger.
The decision was at odds with key economists and all four major banks who previously predicted a cut of 25 basis points, or 0.25 per cent.
Announcing the decision to hold rates last month, RBA governor Michele Bullock said the board was waiting to confirm whether inflation was “still on track”.
“We must keep inflation down while trying to keep a healthy job market.”
Ahead of this week’s decision, economists again said a rate cut was all but locked in after the much-anticipated inflation figures confirmed a slowdown.
Graham Cooke, head of consumer research at Finder, said the RBA faced a mortgage-holder revolt if the RBA didn’t cut rates this month.
“If the RBA doesn’t cut, they are risking an all-out attack on their legitimacy in the eyes of many homeowners,” he said.
“Last month’s decision to hold shocked the market, and we are now seeing a 90 per cent-plus certainty of a cut.
“With inflation well within the target range, there is no reason to hold.
“Banks will be under intense scrutiny to pass on a cut in full.
“If your rate’s sitting above 5.5 per cent after this change, you’re probably paying more than you need to.”
Some banks have already moved to change their interest rates ahead of the August announcement.
Multiple lenders have cut their fixed home loan rates, including Bank of Queensland which slashed its fixed rate below 5 per cent to 4.89 per cent.
NAB also dropped its fixed home loan rates by 0.25 per cent, with its lowest rate sitting at 5.19 per cent, according to Canstar analysis.
Others which moved fixed rates lower included G & C Mutual Bank, Macquarie Bank, The Mutual Bank, The Unity Bank and Bank of China.
Meanwhile Auswide Bank, Up, Macquarie Bank and The Mutual Bank dropped at least one variable home loan rate, according to Canstar.
ANZ’s digital bank, ANZ Plus, bucked against the trend and raised its variable home loan interest rates by 0.16 per cent last week, to 5.75 per cent.
Here’s what 40 economists and brokers had to say about the RBA’s rate decision.
Experts predicting a specific rate cut:
Deutsche Bank: 0.25 per cent cut, with another 0.25 per cent in September
All nine RBA board members will vote for a 0.25 per cent cut tomorrow and should follow with another 0.25 per cent cut in September, according to the bank’s chief economist for Australia, Phil O’Donaghoe.
Bendigo Bank: 0.25 per cent cut, but there’s a case for 0.35 per cent
Chief economist David Robertson said it wasn’t a matter of whether the RBA would cut the cash rate, but by how much.
He believes there is a case for a drop of 35 basis points, instead of the standard 25 basis points.
“Since then the jump in unemployment to 4.3 per cent for June, together with the low, benign read for second quarter CPI suggests the RBA would have been vindicated in cutting rates last month.”
He has projected another further cut this year, as well as one more before February 2026, which would bring the cash rate down to about 3 per cent to 3.25 per cent.
University of Melbourne: 0.15 to 0.25 per cent cut
Tomasz Wozniak said: “This time they will, right? The markets are right in their assessment that the cash rate is on a downward-sloping trajectory. Last month’s decision to hold does not contradict this.”
ANZ: 0.25 per cent
The big-four bank has forecast a 25 basis point cut tomorrow, followed by a second 25 basis point decrease in November, with the cash rate to then remain at 3.35 per cent for an extended period.
Experts predicting an unspecified rate cut:
KPMG
Senior economist Terry Ransley agreed there would be a cut for August, saying “nothing in the data should be holding it back now”.
He also noted further rate cuts would help sustain unemployment at 4.3 per cent – the highest level since late 2021, but still historically low.
“Although Australia has achieved a relatively smooth soft landing, economic risks remain,” Mr Rawnsley said.
“That’s why further rate cuts are essential to preserve labour market gains and mitigate potential challenges ahead, including geopolitical risks and fragile domestic growth.”
QIC
Chief economist Dr Matthew Peter said “falling inflation, softening labour market – no remaining hurdles for a rate cut.”
Oxford Economics Australia
Sean Langcake said there had been more evidence the labour market was softening.
“Moreover, the Q2 CPI did not contain any red flags around core inflation pressures.
“This paves the way for an August rate cut.”
Lateral Economics
Nicholas Gruen noted “I’d say they’re a tad embarrassed by their last decision and so will keep things moving this time.”
Capital.com
Kyle Rodda said markets “got confused by previous RBA commentary that suggested a change in reaction function”.
“All along, they hadn’t shifted their focus from the quarterly CPI print. That was roughly where the RBA wanted it to be, so with the labour market also looking shaky, there’s no reason not to cut.”
Loan Market
David McQueen said: “Trimmed mean inflation has fallen again since the last RBA meeting, down to 2.7 per cent in the 12 months to the June quarter, putting it firmly in the RBA’s target range. Buyers are getting their finances in order ahead of the spring real estate season, weighing up their options, and positioning themselves to act.
My Housing Market
Dr Andrew Wilson said: “The latest ABS June quarter CPI data has clearly matched the RBA’s implied preconditions for a rate cut with the monthly data indicating continued weakening of inflation. Recent easing of the labour market also adds to the case for an August rate cut.”
Mortgage Choice
Anthony Waldron said: “The Reserve Bank Board exercised caution at its last meeting, but since then we’ve seen the ABS’s June quarter Consumer Price Index show that the headline inflation rate remains within the RBA’s target band, up 2.1 per cent annually. My view is this will give the RBA the confidence it needs to cut interest rates for the third time this year.”
University of Tasmania
Mala Raghavan said: “Inflation has remained within the target range for some time, while unemployment has risen slightly. Ongoing uncertainty from unpredictable ‘Trump Tariff’ policies and the geopolitical tensions around the world have slowed the global economy. Due to these issues, the RBA may consider lowering interest rates.”
UNSW Sydney
Nalini Prasad said: “the market expects a cut in the cash rate given the most recent inflation data which shows a continued downward trend in inflation. An increase in the unemployment rate also points to a softening in the labour market.”
Oxford Economics Australia
Sean Langcake said: “The RBA showed an abundance of caution in keeping rates on hold in July. Since then, we’ve seen more evidence that the labour market is softening. Moreover, the Q2 CPI did not contain any red flags around core inflation pressures. This paves the way for an August rate cut.”
WLTH
Brodie Haupt said: “Last month, the board needed further evidence that inflation was on the decline and decided to play it safe with a hold. With new data confirming the decline of core inflation to 2.7 per cent from the 12 months leading to June, I believe the board members may be more confident about a cut.”
Macquarie University Business School
Geoffrey Kingston said: “The latest inflation data fall within the Bank’s target range. The latest labour market data show a distinct weakening. The Bank is therefore likely to cut.”
QUT
Noel Whittaker said: “At the last board meeting, the governor, Michele Bullock, hinted that they were just waiting to be convinced about getting inflation within a certain band, and that seems to have happened.”
Monash University
Mark Crosby: “Latest inflation numbers will allow the RBA some room to move.”
School of Economics, University of Sydney
Associate Professor Mark Melatos said: “Monthly inflation readings have been falling precipitously for a while.
“The RBA has already felt sufficiently confident to cut rates at its February and May meetings and, if anything, the inflation situation appears to have moderated even more since then. “Given that the Federal election has been held, and the increased geopolitical uncertainty, there seems to be little (apart from inexorably increasing house prices and continued full-employment) stopping the RBA moving to ease further now.”
LJ Hooker Group
Mathew Tiller said: “I think the RBA will cut rates in August. Inflation is contained, the jobs market has softened and global growth is slowing, so the case for easing is strong. For property markets, a cut should lift buyer confidence, and while listings remain low, it could also encourage more vendors to list.”
Griffith University
Tim Nelson said: “Weaker inflation, subdued spending, and a still-tight labour market support the case for gradual easing.”
Macquarie University
Jeffrey Sheen said: “Inflation is sustainably in the RBA’s target range. The cash rate needs to be returned to neutral. The RBA has more than sufficiently proven its strong commitment to its inflation target.”
AMP
Shane Oliver, said: “Underlying inflation is falling as the RBA expected and is now around the midpoint of its target, the risks to unemployment are shifting to the upside and monetary policy is still tight so it makes sense to continue easing.”
Experts predicting a rate hold:
University of Sydney
Stella Huangfu said: “I think the RBA should keep interest rates on hold at its August meeting for two reasons. First, June quarter trimmed mean annual CPI inflation is still 2.7 per cent, which is high within the 2–3 per cent target band and slightly above the RBA’s forecast of 2.6 per cent.
“Second, the RBA has already cut rates twice this year, giving it scope to pause and assess the impact before moving further.”
University of Western Australia
Jakob B Madsen said: “The economic environment in Australia has not changed recently and the Fed funds rate is still higher than the RBA cash rate”.
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