Homeowners face longer wait for cash rate cut as inflation persists
Homeowners hoping for an early reduction in the Reserve Bank of Australia’s (RBA) cash rate will need to wait until at least May next year, according to Bendigo Bank’s latest economic update.
The bank’s chief economist, David Robertson (pictured top), pointed to persistent inflation and recent economic data as key reasons for the delay. “There is still an expectation of lower rates ahead, but the latest inflation numbers were a setback with broad-based price pressures across housing costs, market services and grocery inflation,” he said. “This has pushed back the next RBA cash rate cut by around six months – most likely to around May next year.”
Robertson noted that while a further cut to 3.35% is expected, a more substantial easing cycle appears less likely. “It’s still very likely that we get another cut to 3.35%, taking us 1% below last year’s peak, but the case for a deeper easing cycle is now less convincing partly due to the uncertain outlook for inflation,” the economist said.
“Unlike the US Federal Reserve, the Bank of Canada and the Reserve Bank of New Zealand who all cut their rates in October, the RBA will now need to see more data before being in position to follow suit.”
Recent improvements in household spending, business conditions, and record property and share market values have also contributed to the RBA’s cautious approach.
Labour market data remains a key factor influencing the outlook for interest rates. “The most compelling argument for at least one more RBA rate cut in 2026 is recent weaker jobs data, with the unemployment rate rising to 4.5% in September, its highest level since 2021 and the risk of this trend continuing over the next 12 to 18 months,” Robertson said. “Interestingly, the updated RBA forecasts still only predict unemployment peaking at 4.4%, so the next few months’ jobs numbers will be important to see if the RBA are right in their assumption that labour markets will remain relatively tight.”
For mortgage brokers, the delayed rate cut means clients may face higher borrowing costs for longer, potentially slowing new loan demand and refinancing activity. Brokers should prepare for continued cautiousness among borrowers and focus on providing guidance as the market awaits clearer signals from the RBA on future rate movements. Staying informed on economic updates will be essential for advising clients effectively during this period.
Globally, some risks have eased, particularly regarding tariffs. “After some setbacks last month, the US-China trade relationship now appears to be in a lasting truce, and the latest economic data from our major trading partners in Asia continues to show resilience,” Robertson noted. However, the United States remains an area of concern. “The US isn’t getting any official data as their government shutdown continues into its second month, but labour markets in the US do appear to be at risk, hence the need for their recent rate cut below 4%."
In Australia, economic growth has improved in 2025, but forecasts for 2026 and 2027 remain subdued. “Private demand is expected to increasingly take the reins of growth from public spending next year, but the interplay between AI, productivity and output will be a key driver for the path ahead,” Robertson said.
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