Australia’s big four banks are forecasting a 25 basis point interest rate cut by the Reserve Bank of Australia (RBA) this Tuesday, a move that would lower the cash rate to 3.60 per cent. The anticipated decision follows a decline in inflation, fuelling expectations of further cuts in the coming months.
The RBA last cut rates in June but held them steady in July, with governor Michele Bullock stating the pause was about timing rather than direction. According to the banks, recent data now supports a renewed easing cycle, potentially delivering relief to millions of mortgage holders.
Inflation and Unemployment Shifts Pave Way for Policy Change
Headline inflation eased to 2.1 per cent in June from 2.4 per cent in May, while trimmed mean inflation fell from 2.9 per cent to 2.7 per cent, according to official figures. The slowdown has strengthened the case for an August cut, with the RBA aiming to keep inflation within its 2 to 3 per cent target range.
Unemployment has also edged up, rising to 4.3 per cent in June from 4.1 per cent the previous month. Although employment grew by 2,000 people, the increase in joblessness signals softer labour market conditions. According to Westpac chief economist Luci Ellis, the inflation figures provide “confirmation” that the economy is cooling as intended, setting the stage for a rate reduction.
Commonwealth Bank (CBA), Westpac, NAB and ANZ have all publicly stated they expect a unanimous decision to cut the cash rate on 12 August. Market expectations reflect the same sentiment, with 91 per cent of economists surveyed by Finder forecasting a reduction.
Banks Outline Roadmaps for Further Rate Cuts
While consensus exists for an August cut, the major banks diverge on the pace and extent of future easing. According to NAB chief economist Sally Auld, the bank projects three cuts over the next nine months – in August, November, and February – reducing the cash rate to 3.10 per cent. CBA expects two cuts, in August and November, which would bring the rate to 3.35 per cent, with the possibility of further easing in early 2026.
Westpac’s forecast is the most aggressive, predicting four cuts – August, November, February and May – taking the rate to 2.85 per cent. ANZ anticipates two cuts, in August and November, matching CBA’s end target.
For borrowers, the savings are tangible. Canstar estimates that a 25 basis point cut on a $600,000 loan with 25 years remaining could reduce monthly repayments by $90, while a $1 million mortgage could see payments fall by $150.
The RBA will announce its decision at 2:30pm on 12 August, with three further meetings scheduled for the remainder of the year: 29–30 September, 3–4 November, and 8–9 December.
