The National Australia Bank (NAB) updated its forecast Thursday, with the expectation of further rate cuts on the horizon this year.
The bank, one of Australia's Big Four, now expects the Reserve Bank of Australia (RBA) will reduce the official cash rate (OCR) to 2.6% by February 2026.
At the current 4.10% OCR, that would entail the nation's central bank chopping off 50 basis points during its May meeting, then another 25 basis points during the July, August, November and February 2026 meetings.
"Much has changed since the RBA Board met in early April," said NAB Chief Economist Sally Auld. "Risks to both global and domestic growth have shifted to the downside. Against this backdrop, a restrictive policy stance in Australia is no longer appropriate, in our view."
In Australia, Auld predicted that headwinds include slower growth and rising unemployment. At present, the nation's unemployment rate is 4.10%.
"A weaker global backdrop and the impacts of weaker consumer and business confidence have now shifted the distribution of risks away from a tighter labour market and towards the risk of a rise in the unemployment rate," said Auld.
In addition, a global trade war, hinging on US President Trump's fluctuating tariff policies, has left much of the world on edge.
"Though we expect the direct impact of tariffs on Australia to be small (with the US a relatively small goods trading partner), we are not immune from the indirect impacts," Auld said. "For Australia, we see the key impact on activity being driven by three channels: first, consumer and business confidence; second, potential national income and wealth impacts from weaker commodity prices; and third, volatility in financial markets. Managing the risks associated with each of these channels argues for a shift to a more preemptive policy response by the RBA.
"The distribution of risks to both growth and inflation in Australia have shifted such that the central bank is required to act with some sense of urgency," she added.
The RBA held the OCR at its meeting earlier this month, much to the dismay of homeowners. But more rate cuts in the back half of the year would be a welcome relief for mortgage holders and investors alike, many of whom have been struggling amid inflationary pressures.
