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Westpac says the case for a Reserve Bank of Australia (RBA) rate cut in November remains open, with upcoming inflation and labour figures likely to determine whether the central bank moves or holds steady.
“There is still enough data to come before the November meeting to shift the balance of risks to a cut at that meeting,” the bank said in its October 2025 Market Outlook. Westpac added that the decision could “go either way,” noting that “a resilient labour market print or an even stronger September quarter underlying inflation outcome would be enough to stay the RBA’s hand.”
The report said the RBA kept the cash rate unchanged in September, citing a rebound in private-sector demand, stable employment conditions, and signs that inflation could remain sticky in some areas. Although underlying inflation has stayed within the 2% to 3% target range, the August CPI indicator suggested the September quarter result “would be stronger than earlier thought.”
Westpac expects underlying inflation to drop below the midpoint of the target range in 2026, pointing to “subdued wages growth and decent productivity growth in market-sector industries” as limiting future price pressures.
“If the RBA does hold in November, our conviction that they end up cutting in February rises,” the report said, forecasting a trough of 2.85% for the cash rate.
Senior economist Pat Bustamante said household demand remains the engine of recovery: “After one of the largest negative income shocks on record, the Aussie consumer looks to be making up for lost time.”
Household consumption rose 0.9% in the June quarter – the strongest since 2022 – and Westpac raised its September quarter forecast to 0.7% amid stronger spending data.
Chief economist Luci Ellis (pictured) said global developments continue to shape the policy backdrop, with the U.S. Federal Reserve “flying blind” due to a government shutdown that has delayed key economic data.
“This might point to a more dovish tilt to monetary policy,” Ellis said, though underlying inflation risks in the US remain.
