All eyes are on the nation's central bank this week, as the market braces for interest rates to stay put.
The Reserve Bank of Australia (RBA) meets today to kick off its two-day meeting, the latest on monetary policy.
Market players, including all of Australia's Big Four banks, are forecasting the RBA will hold the official cash rate (OCR) at 3.60%. The consensus view is that the RBA will maintain rates this month, opting instead to chop 25 basis points off rates during its November meeting.
The move would no doubt be a letdown for mortgage holders and investors hoping for some added relief amid surging living costs and an ongoing housing shortage.
The RBA has already delivered three rate cuts in 2025. But RBA Governor Michele Bullock also made clear earlier this year that the bank would take a wait-and-see approach before further reducing rates, reaffirming the board's target 2% to 3% inflationary range.
The last quarterly consumer price index (CPI), in June, confirmed that inflation continues to trend downward. Both headline CPI and trimmed mean inflation declined over the quarter, with annual CPI easing to 2.1%, down from 2.4% in the previous period, while trimmed mean inflation dipped to 2.7%, compared with 2.9% in the prior quarter.
Although August's monthly CPI figures – while not generally considered as accurate a gauge of underlying inflation – still raised eyebrows with inflation rising slightly to 3%.
Unemployment, meanwhile, remains historically low in August at 4.2%. But some economists have said the jobs market appears to be tightening slightly – up from 4.0% at the start of the year.
But Bullock also made headlines earlier this month when she said stronger-than-expected consumer spending could add to inflationary pressures and delay further interest rate cuts.
Consumer spending in Australia rose two points during the last week of August, according to the latest ANZ-Roy Morgan Survey, only to fall for two straight weeks in September.
Bullock wasn’t alone in flagging rising consumer spending. Stronger-than-expected retail activity has prompted some economists to revise their forecasts for the RBA’s next move.
Here's what Australia's Big Four banks are saying.
Commonwealth Bank is forecasting rates will stay the same during this month's meeting. Instead, the major is tipping a 25 basis point reduction at the November meeting – likely the last one for some time.
"The base case is for just one more cut in November," Harry Ottley, economist at CBA, told Australian Broker. "The economy is picking up a little bit more quickly than expected. And as a result, there'll just be less rate cuts needed."
Westpac also expects the RBA to hold rates steady this month, with a base case scenario for a November rate cut.
"Anyone who thought there was a lingering chance of a cut next week will have ruled it out following this week’s August partial inflation data," said Westpac Group chief economist Luci Ellis.
The major is anticipating further rate cuts in November, as well as February and May 2026.
"With the economy already broadly at full employment and inflation at target, the RBA will not rush to cut rates, but neither will it see a need to keep policy unnecessarily restrictive for an extended period," Ellis said. "The timing of future rate cuts remains uncertain and it is possible the RBA ends up cutting by less than our current base case."
ANZ also sees rates holding steady in September, with a possible November cut hinging on incoming data.
"The meeting of the RBA’s monetary policy board [this] week is very likely to pass with no change in rates," said Adam Boyton, head of Australian economics at ANZ.
"There is now a real risk of no rate cut in November, with the near-term path for rates highly data dependent," he added. "The key data between now and the November monetary policy meeting are the September labour force release, household spending data and the Q3 CPI. Ahead of those data points (and a detailed Q3 CPI preview), we will hold our November rate cut call for now.
"We also retain our view that once the cash rate reaches 3.35% it is likely to stay at that level for a considerable period," Boyton said.
National Australia Bank also expects the RBA to keep rates on hold this month. But while the major was previously anticipating a rate reduction in November, economists now think the next cut won't come until May 2026.
"If I had to think about a scenario where I could be wrong on that forecast, I suspect it's probably because the Reserve Bank might not do two [rate cuts]; they might just finish with one more," said Sally Auld, NAB's chief economist. "I think that's a more likely outcome than worrying about a scenario where the Reserve Bank might have to do more than two rate cuts."
The RBA will announce its interest rate decision on Tuesday at 2:30 p.m.
