Banks all sing from same hymn sheet on RBA rate cut
ANZ has become the final big-four bank to predict a 25 basis point interest-rate cut when the Reserve Bank of Australia meets next Tuesday following disappointing retail figures released earlier on Wednesday.
The Australian Bureau of Statistics figures showed Australians spent slightly more in May compared with April, but it was not nearly the boost markets were expecting following a rate cut in May.
Retail sales jumped 0.2 per cent in May following a disappointing April when sales fell by 0.1 per cent despite two long weekends in the period.
This was compared with market expectations of a 0.5 per cent increase in retail turnover.
ANZ head of Australian economics Adam Boyton said sluggish retail spending, stalled consumer confidence and growing uncertainty around US trade policy were key reasons why his bank was predicting an earlier rate cut.
'A 25bp reduction in the cash rate in July is the path of least regret rather than waiting for August and a full forecast update, as has been the RBA's approach to the prior two rate cuts and the November 2023 tightening,' the bank wrote in a report.
Betashare chief economist David Bassanese said Wednesday's weaker than expected retail figures 'flashed yellow lights' for the RBA, although he was sticking with a rate cut forecast in August.
'Accordingly, although retail sales rose a weaker than expected 0.2 per cent in May, it does not necessarily give the green light to the RBA to cut interest rates next week,' he said.
'Anecdotal credit card data suggests there's been a solid uplift in retail spending in recent months even though it has not yet been reflected on retail sales.'
NAB was the first to forecast a rate cut in July, having been the most bullish on rate relief for homeowners.
Back in April, NAB predicted a 50 basis point cut in May followed by 25 basis point cuts in July, August, November and February 2026.
The RBA cut rates by 25 basis points in May instead.
CBA is also anticipating a rate cut in July as well as further rate relief in August.
The call from ANZ follows Westpac chief economist Luci Ellis updating her economic forecast to a 'likely' move in July, although she cautioned that it was not a 'shoo-in'.
'Moving more quickly than the 'cautious and predictable' path flagged in May implies that the RBA's forecasts need to shift,' she said.
'We expect that the inflation evidence will overtake the RBA's thesis of domestic tightness over time.
'But we do not think they are going to start singing from an entirely different song sheet just yet.'
Mozo spokeswoman Rachel Wastell said if the major banks were correct in their forecasts of a rate cut on July 8, it could make a big difference for mortgage holders.
'For some households, a 25bps cut could mean real monthly savings, around $76 a month or $918 a year on a $500,000 loan, she said.
'For others, it could be the push they need to refinance or give them the wiggle room they need to be able to meet the serviceability requirements to refinance and get a lower rate.'
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