The RBA will announce its cash rate decision on September 30, with banks expecting it will be a hold. (Source: AAP)
Australia’s Big Four banks expect the Reserve Bank of Australia (RBA) will keep the cash rate on hold this month, with a November cut firmly on the cards. The unemployment rate held steady at 4.2 per cent in August, but the “weaker-than-expected” figures are unlikely to speed up interest rate cuts.
Australian Bureau of Statistics data found employment fell by 5,400 in August, following a solid 26,500 gain in July. Full-time employment dropped by 40,900 during the month, while part-time employment grew by 35,500.
The jobs data was a “key” piece of information ahead of the RBA’s interest rate call this month. While it was weaker than anticipated, Westpac economist Ryan Well said it was “unlikely to shift the dial” at the September meeting.
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“[The] data painted a weaker picture on the labour market than we had anticipated, but the broad strokes remain unchanged – the labour market is gradually softening once again,” he said.
“This is unlikely to shift the calculus materially for the RBA, which prefers to take a multi-month view on current trends given the volatility in the monthly data.”
All of the Big Four banks expect the next cut will come in November, with Westpac noting it expects a further 50 basis points of easing in 2026.
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Commonwealth Bank economist Harry Ottley said the data was a “mixed bag” but noted the unemployment rate was broadly tracking as the RBA had expected.
“But the unemployment rate is now very close to the forecast peak, leaving little room for a further drift higher,” he said.
ANZ economist Aaron Luuk agreed the data would not sway the market one way or another on the November RBA meeting, where a rate cut is expected, “or for that matter the coming September meeting, which should pass with no change in rates”.
NAB economists also said they expected the cash rate to remain unchanged at the upcoming September meeting.
“The flow of data so far does not suggest any urgency to lower rates,” economists said.
The monthly Consumer Price Indicator rose 2.8 per cent in the 12 months to July, up from 1.9 per cent in June, marking the highest annual inflation rate since July 2024.
The RBA will meet later this month to set the cash rate. It will then meet in November for its second-last gathering of the year, where the major banks expect it will drop rates.
Here are their predictions:
CBA: One more cut in November to bring cash rate to 3.35 per cent
Westpac: Three more cuts in November, February and May to bring cash rate to 2.85 per cent
NAB: Two more cuts in November and February to bring cash rate to 3.10 per cent
ANZ: One more cut in November to bring cash rate to 3.35 per cent
Markets were pricing in a 10 per cent chance of a rate cut this month and a 86 per cent likelihood of a 25 basis point cut by November.
The RBA will announce its next interest rate decision on September 30.
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