The National Australia Bank has dropped its May forecast for when the next rate cut will be, pushing it out much further. Picture: NewsWire/ Gaye Gerard
One of Australia’s biggest banks has issued a jaw-dropping rates warning for homeowners and borrowers.
The National Australia Bank on Thursday scrapped its prediction for when the next cash rate cut will be, warning the Reserve Bank of Australia would now hold steady at 3.6 per cent for the foreseeable future.
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Surging house prices and booming investor lending are said to be part of the reason more rate cuts would just add fuel to the fire.
The move comes as surging house prices and booming investor lending complicate the RBA’s decision-making processes, making further cuts unlikely as the central bank tries to prevent the economy from overheating.
“We no longer expect the RBA to make a final cash rate cut in May 2026,” NAB said. That means Aussies hoping for rate relief now have to wait more than seven to nine months for the RBA monetary policy meetings after that to see if the data has shifted again.
NAB’s economic forecasts were also slightly downgraded, with GDP expected to grow around 2 per cent and unemployment steady at 4.4 per cent, rather than declining as previously hoped.
NAB Group chief economist Sally Auld authored the report with colleagues Gareth Spence and Taylor Nugent. Picture: Nikki Short
NAB chief economist Sally Auld, head of Australian economics Gareth Spence and senior economist Taylor Nugent attributed the shift to three key factors: inflation – underlying inflation is set to remain above 3 per cent for the next year; growth – the economy is accelerating, with capacity already stretched; and housing – rising home prices and investor activity argue for stable policy.
They see the effects of tax cuts and earlier rate cuts that boosted income growth fading in the coming months, adding the RBA has time on its side to decide whether even higher rates will be needed.
“For the RBA, the appropriate stance will be to remain broadly around neutral, for now,” NAB’s team said.
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