The prospect of an interest rate cut by the Reserve Bank of Australia (RBA) has gained significant traction following fresh economic data showing inflation is easing. This potential policy shift could deliver meaningful relief for millions of mortgage holders nationwide.
According to Westpac chief executive Anthony Miller, the combination of slowing inflation and stable financial conditions provides a compelling case for the central bank to reduce rates. Markets are now heavily pricing in a cut at the RBA’s august meeting, a move that would mark a turning point in Australia’s monetary policy.
Inflation Trends Point Toward Monetary Easing
The Australian Bureau of Statistics (ABS) recently reported that headline inflation fell from 2.4 percent to 2.1 percent in the June quarter. Meanwhile, underlying inflation, measured by the trimmed mean, eased from 2.9 percent to 2.7 percent, moving firmly within the RBA’s target range of 2 to 3 percent.
Miller emphasized that the trimmed mean is a crucial measure for policymakers, describing it as a reliable indicator of sustained disinflation. This trend has strengthened the expectation that the RBA may implement a 25-basis-point cut, which would bring the official cash rate down to 3.6 percent.
Westpac Projects Direct Impact for Households
If the RBA lowers rates in August, Westpac estimates that borrowers could save an average of $350 per month on their mortgage repayments. Miller noted that Westpac stands out among Australia’s major banks because it automatically passes on these savings to customers making minimum repayments.
By contrast, Commonwealth Bank (CBA), national Australia Bank (NAB), and ANZ require borrowers to request this adjustment manually. According to Westpac data, only one in ten customers of those banks took advantage of the may rate cut, leaving potential savings on the table.
Independence of the Reserve Bank
Despite market confidence, miller cautioned that the decision ultimately rests with the RBA. The central bank demonstrated its independence in recent months when it unexpectedly held the cash rate at 3.85 percent, surprising financial markets.
Speaking at a trans-tasman business circle event, miller stated: “I think we’re lucky to have a reserve bank and a governor with that independence and that confidence to look after the country’s long-term interests.” His remarks underline that while the case for a cut is strong, it is not guaranteed.
Improved Financial Position of Borrowers
Miller also pointed to encouraging signs in the financial health of borrowers. The number of Westpac home loan customers who are 90 days or more behind on repayments has been steadily declining. This trend indicates that households are beginning to stabilize financially, easing concerns of widespread mortgage stress.
Supporting this outlook, Westpac chief economist Luci Ellis reaffirmed the bank’s forecast that the RBA will cut rates in August, citing the clear downward movement of inflation and the bank’s confidence in Australia’s economic resilience.
