Westpac Predicts No Rate Relief Until May 2025 – Here’s Why
It looks like we’ll have to wait longer for rate cuts
Westpac has revised its view of the most likely scenario for the path of the RBA’s cash rate, pushing out the start date of the RBA rate-cutting cycle from February to May 2025, but more front-loaded than previously assumed.
This adjustment aligns with the National Australia Bank’s (NAB) earlier projection, which also shifted the expected rate cut to May 2025.
Westpac’s Chief Economist, Luci Ellis, explained that the decision to delay the forecasted rate cut reflects the RBA’s cautious approach amid Australia’s robust labour market and persistent inflationary pressures.
Ellis noted that while an earlier cut in February or March remains possible, a May commencement is deemed more likely due to the current economic conditions.
Similarly, NAB’s economic team revised their monetary policy outlook, postponing the anticipated rate cut from February to May 2025.
This adjustment was influenced by stronger-than-expected labour market data and ongoing inflation risks.
The convergence of these forecasts from two of Australia’s major banks underscores a shared perspective on the RBA’s monetary policy trajectory.
Interestingly, Dr. Andrew Wilson made this forecast a number of months ago in our weekly property insiders chat, giving firm evidence as to why this would be a more likely date.
Both banks acknowledge the complexities of the current economic environment, particularly the balance between controlling inflation and supporting employment.
For homeowners and investors, this alignment suggests that the current interest rate levels may persist longer than most hoped.
What this means for property investors
- In the Short Term: Expect subdued demand, cautious investor activity, and rising rents due to a lack of supply.
- In the Medium Term: As the rate cut draws closer and confidence improves, the market will begin to pick up, especially in well-located suburbs and premium markets we’re homeowners and buyers have significant equity
- In the Long Term: The fundamental undersupply of housing, combined with population growth, will reignite property price growth when borrowing conditions ease.
