Why Did the Major Banks Change Their Rate Forecasts This Week?
The ABS monthly indicator showed headline CPI rose 3.5% in the 12 months to July, down from 3.8% in June, but prices rose 1.0% in the month alone and the trimmed mean held at 3.6% ABS. Housing costs rose 5.0% over the year, driven by a 5.7% lift in new dwelling prices as builders passed on higher material and labour costs. Automotive fuel rose 7.5% in July alone after three monthly falls.
ANZ moved first, forecasting a 0.25 percentage point rise in November. CBA followed with a November call, NAB expects a move as early as September, and Westpac is now the only major bank forecasting rates on hold through the end of the year Australian Broker. CBA economist Harry Ottley said: “We have a fairly high conviction that the RBA will hike at some point this year.” NAB chief economist Sally Auld added that “the risk is biased towards an additional hike in November.”
Markets were pricing around a 40% chance of a September rise by Thursday, and close to a 97% chance of a November move if the Board holds next month. A further 0.25 percentage point rise would take the cash rate to 4.60%.
| Bank | Next move | Timing |
|---|---|---|
| NAB | +0.25% | September |
| ANZ | +0.25% | November |
| CBA | +0.25% | November |
| Westpac | Hold | Through end of 2026 |
What Did the RBA Minutes Reveal About the August Decision?
Minutes from the 10 to 11 August meeting, released on Tuesday, showed the Board weighed a 0.25 percentage point rise against holding at 4.35% before deciding to wait RBA. Members judged that financial conditions were already somewhat restrictive and that more time was needed to assess incoming data. They also listed the risks that could force a move: higher oil prices, fuller pass-through of costs from the Middle East conflict, and a bigger than expected investment boom in data centres and artificial intelligence.
The minutes noted national home prices had fallen around 1.5% from their March peak while remaining well above pre-pandemic levels, and that investor-led housing loan demand had dropped significantly. The Board said it stands ready to raise rates again if the upside risks materialise, with the inflation, labour market and national accounts data due before the 28 to 29 September meeting set to shape that call.
If the RBA lifts rates in September, when would repayments change?
Lenders announce their own response after an RBA decision, usually within days, and set an effective date that is often one to two weeks later. They then give variable rate borrowers written notice before the repayment amount changes, so the higher repayment can take several weeks to appear. Fixed rate borrowers are unaffected until their fixed term ends.
How Are Petrol Prices Feeding Into the Rate Outlook?
Weekly inflation expectations measured by ANZ-Roy Morgan rose to 6.1% in the week to 23 August, up 0.5 percentage points on July and the third straight weekly increase Australian Broker. Roy Morgan chief executive Michele Levine said petrol prices are up more than 40 cents a litre since late June and averaging over $2 a litre in August, after the temporary fuel excise cut was fully wound back.
Consumer confidence rose to 77.5, its highest reading since the conflict in Iran began in late February, though still below year-earlier levels. Renters have been more confident than mortgage holders for eight straight weeks, a reminder that households with large variable rate loans feel the rate outlook most directly.
Are Auction Results Pointing to Further Price Falls?
The preliminary combined capital city clearance rate slipped to 53.2% last weekend from a 12-week high of 56.5%, across 1,406 auctions, 31.9% fewer than the same week a year ago Australian Broker. Sydney’s preliminary result of 56.6% extended a run of 16 consecutive weeks below 60%, while Brisbane cleared 40.4% and Canberra 41.4%.
Cotality’s Tim Lawless has pointed out that auction outcomes and home value trends have historically moved closely together. With clearance rates mostly in the low to mid 50s, the auction market is signalling more softness in values through spring, particularly in Sydney and Melbourne where buyers have the most stock to choose from.
Why Has the Rental Vacancy Rate Picked Up?
The national rental vacancy rate rose to 1.5% in July according to realestate.com.au, the highest level since February 2022, with Canberra at 1.9%, Melbourne 1.8% and Sydney 1.7% Australian Broker. Senior economist Anne Flaherty linked the improvement to a surge in investor buying, with new investor loans in the 12 months to June reaching their highest level since the ABS began reporting the series in 2019.
That relief may not last. Flaherty expects investor activity to slow after the May Budget reduced tax concessions for established properties, and some lenders, including two of the major banks, now limit the negative gearing benefit they count in serviceability to newly built homes or established properties contracted before the Budget. Investors weighing an investment loan may find their borrowing capacity differs noticeably between lenders as a result, and the tax side of that decision is best worked through with an accountant.
Key Takeaways
- •Headline inflation eased to 3.5% in July, but the trimmed mean held at 3.6%, well above the RBA’s 2% to 3% target.
- •NAB, ANZ and CBA now forecast another 0.25 percentage point rate rise this year, while Westpac expects a hold.
- •RBA minutes show the Board considered raising rates in August and stands ready to move if inflation risks materialise.
- •Inflation expectations rose to 6.1% as petrol averaged more than $2 a litre after fuel excise relief ended.
- •The combined capital city clearance rate slipped to 53.2%, with Sydney below 60% for a 16th straight week.
- •National rental vacancy rose to 1.5% in July, the highest since February 2022, on the back of strong investor buying.