NAB economist flags improving household conditions and business sentiment, but warns mortgage brokers not to expect another RBA rate cut anytime soon
Brokers should brace for a stable but cautious macroeconomic environment heading into 2026, with NAB chief economist Sally Auld forecasting a return to trend GDP growth of around 2.25% next year.
In NAB’s latest Forward View webinar, attended by MPA last Thursday, Auld discussed how Australia looks set for a soft landing – a scenario where inflation is brought under control without derailing the labour market.
“There are a couple of important dynamics underlying this forecast,” Auld said.
Firstly, there is a transition underway in Australia’s growth profile, with private sector activity – particularly household consumption – beginning to lead the charge in place of public sector activity.
“We’re seeing households regain some spending power as real disposable incomes lift,” Auld said, pointing to falling inflation and 75 basis points worth of cuts to the cash rate this year.
“Those two things together, plus the fact that employment growth has remained pretty solid this year, has basically meant that households' gross real disposable income has started to pick up… that's all a good thing for the domestic economy,” said Auld.
Indeed, the latest Roy Morgan data shows that mortgage stress has dropped to the lowest level since early 2023, with improved household incomes having the largest impact on stress levels.
However, it’s worth noting that improved household finances have not necessarily led to more refinancing activity.
As Commonwealth Bank’s latest home loan figures showed, just 11% of eligible CBA customers lowered their direct debit repayments following the August rate cut. Only 8% of first-home buyers chose to reduce their repayments.
Mortgage holders, as it turns out, have been taking advantage of their improved finances to chip away at larger portions of their mortgages.
Business confidence rebounds
For brokers servicing commercial clients, the rebound in business confidence should help lift moods.
Auld noted how perceptions of profitability have improved notably over recent months, per NAB’s internal survey data. And after years of margin pressure and subdued growth expectations, SMEs are showing renewed resilience.
Recent comments from SME-focused lenders underscored this resilience.
“SME credit demand in Australia is definitely rising,” ORDE Financial’s director of distribution Lee Prior recently told MPA.
Prior explained that business owners are increasingly looking to refinance, consolidate, expand and invest in property. He has also seen a strong trend towards property ownership among self-employed borrowers, with many using residential property-backed lending as a practical alternative to unsecured or cash flow loans.
Brokers are naturally tuning into the emerging opportunities in the sector, noted Prior, although “there’s still plenty of untapped potential”.
Echoing Prior’s comments, “we think that businesses are now feeling a little bit more confident and a little bit more secure in an economic outlook that looks pretty favourable over the next six to 12 months”, said Auld.
Impact on interest rates
Auld gave credit to the RBA for piloting a soft landing “because this was a deliberate strategy on their part and they have actually achieved something that was historically quite unusual for many central banks in the last 50 or 60 years”.
The RBA has “managed to bring inflation back to the target band in a reasonable amount of time, and it’s also managed to do that with keeping the labour market broadly intact. And that’s really the definition of a soft landing”, she added.
However, Auld expects the RBA to be “a little more reluctant” to reduce rates in the near future. Further easing could be on hold until mid-2026, with NAB pencilling in one additional cut in the second quarter of next year.
The caution stems from stickier-than-expected inflation in key sectors like housing and market services – trends that could delay any further monetary policy moves.
