Holding your breath over the RBA’s plans to keep hiking rates? Breathe easy. One of the nation’s biggest economists says we’re done for a while. Here’s why.
The Reserve Bank board hands down its next interest rate decision at 2.30pm AEST today. After three rate rises this year that took the cash rate to 4.35 per cent, the rate that flows through to your mortgage, most economists expect the board to leave it where it is.
HSBC chief economist Paul Bloxham goes further than that. Speaking on Switzer TV this week, he argued the hiking is finished for good.
“We think this week they’ll be firmly on hold,” Bloxham said. “And we don’t think the RBA will be lifting rates again from here.”
His call rests on an economy he says is already weakening. Bloxham points to a soft first-quarter growth figure, falling business and consumer confidence, a drop in household spending and a fall in employment in April. He also argues the federal budget is doing the Reserve Bank’s work for it, cooling the property market to the point where auction clearance rates have hit six-year lows and house prices have started to slip.
So when does the first cut land? Not soon. Bloxham thinks the next move is down, but that it is “still quite a long way in the distance.” Asked if that meant well into 2027, he agreed.
The case that the hikes are over
Bloxham has company. Commonwealth Bank’s head of Australian economics, Belinda Allen, has told clients “the RBA will now be on hold for the remainder of 2026,” with the first cuts possibly arriving in 2027 if inflation keeps easing back toward target. NAB chief economist Sally Auld is in much the same place, saying the bank has “greater conviction that the next move in rates is down, but less conviction on the timing.”
For anyone carrying a mortgage, the upshot of that view is simple: if it is right, the rate rises are behind you.
The case for more
Not everyone buys it. Westpac is the standout holdout. Chief economist Luci Ellis, a former assistant governor at the RBA, still expects two more rises this year, in August and September, which would lift the cash rate to 4.85 per cent. Westpac flags that as an 18-year high. Her reasoning is the fuel and energy shock from the Middle East conflict, which she expects to keep pushing prices higher for months yet.
It is not only Westpac. Money markets are pricing close to two more rises by the end of the year, and independent economist Saul Eslake says the August meeting is “live” for another move. “They’ve raised rates three times,” Eslake said. “They’ve taken back all that they gave last year.”
The disagreement comes down to one number: inflation. In its May statement, the RBA said it expected underlying inflation to peak higher than it had previously forecast before easing, and singled out Middle East energy prices as the big uncertainty. That rise was an eight-to-one decision, with one board member preferring no change. Petrol alone has jumped around 35 per cent since February, on AMP’s numbers. The “we’re done” camp is betting the slowing economy pulls inflation down on its own. The “more to come” camp is betting the oil price keeps it elevated.
The decision lands at 2.30pm AEST today, alongside the statement that explains the board’s thinking. In May, that statement said the board would stay “attentive to the data and the evolving assessment of the outlook.” Whether it still reads that way, or hints that August is in play, is what the rate-watchers will be parsing this afternoon.
