UPDATE: In a significant shift, Westpac Banking Corp has just announced that the Reserve Bank of Australia (RBA) may consider cutting interest rates as early as next month. This development comes on the heels of a surprising rise in the unemployment rate, which has prompted economists to reevaluate their forecasts.
As the RBA’s next meeting approaches on November 7, 2023, the latest Westpac Weekly economic report reveals that Australian employment figures are weaker than previously expected. The report indicates a 78% chance of a 25 basis point cut to the cash rate, increasing from just 40% a week earlier.
Westpac analysts state:
“Compared to the RBA’s August forecasts, employment is already on a weaker footing, and the unemployment rate now looks likely to overshoot their projections. This lends weight to our view that there is still a good chance the RBA will cut rates in November.”
The upcoming Q3 Consumer Price Index (CPI) report, due on October 29, could ultimately determine the RBA’s decision. Westpac forecasts that, following the anticipated cut next month, the cash rate will decline to 3.35% by the end of 2025, with further reductions expected to reach 2.85% by June 2026.
Market sentiment, however, appears more cautious. Current data from the ASX 30 Day Interbank Cash Rate Futures indicates only a 44% probability of a rate cut next month, significantly lower than Westpac’s outlook. The market is pricing in a cash rate of 3.25% by the end of next year, contrasting with Westpac’s prediction of 2.85%.
As homeowners and borrowers await the RBA’s decision, the potential for relief is palpable. With rising unemployment impacting economic stability, the implications of a rate cut could provide much-needed financial relief for many Australians.
Stay tuned for further updates as the economic landscape continues to evolve ahead of the RBA meeting in November.
