In a promising update for homeowners, National Australia Bank (NAB) has forecasted multiple interest rate cuts in the coming months. Sally Auld, the bank’s chief economist, indicated that the Reserve Bank of Australia (RBA) is likely to implement a total reduction of 100 basis points by August, with additional cuts anticipated by year-end.
Auld outlined her expectations in a May report, predicting a 50 basis point decrease in May, followed by 25 basis point reductions in July, August, November, and February. This would see the official cash rate drop from the current 4.10 per cent down to 3.10 per cent by mid-August, and further to 2.85 per cent by the end of the year. By February 2026, the rate could potentially reach as low as 2.60 per cent.
However, NAB cautioned that achieving these cuts hinges on the RBA adjusting its perspective on economic risks and adopting a more proactive policy approach. The bank noted that inflation risks are currently skewed to the downside due to global economic shifts and supply chain diversions. NAB argues that a more decisive strategy is needed from the RBA to circumvent these challenges effectively.
Additionally, the recent election results, where the Labor party emerged victorious, are seen as providing a greater sense of stability and predictability for market conditions. Despite this optimism, NAB has revised its global growth outlook downwards, influenced by recent upheavals in US trade policy under President Trump, highlighting the unprecedented impact of such changes on global economic forecasts.
In summary, while NAB is optimistic about potential interest rate reductions that could alleviate financial pressures on homeowners, the actualisation of these cuts will depend on the RBA’s willingness to adapt its policies in response to shifting economic dynamics.