When do CommBank, NAB, ANZ and Westpac think the next RBA rate cut will be?

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on January 24, 2020
When do CommBank, NAB, ANZ and Westpac think the next RBA rate cut will be?

Photo by Matt Howard on Unsplash

The long predicted February cash rate cut from the Reserve Bank (RBA) has been thrown into doubt, with economists split on when the next one will be.

Data released yesterday revealed Australia's unemployment rate fell to 5.1% in December, down from 5.2% in November. 

The figures had many economists eating an increasingly familiar flavour of pie (humble) and wiping theoretical egg off their faces, with most predicting a rise to 5.3%. 

This prediction, coupled with apparent poor retail sales over Christmas (which did not eventuate), had the majority of economists agreeing that February would see Australia's cash rate cut to a record 0.50%.

Prior to the unemployment figures being released, the chance of a cut hovered around 60%; this has now been revised to 25%. 

So when will the RBA cut, if at all? 

The table below displays a selection of variable-rate home loans on offer, featuring a low-rate pick from each of the following three categories: the big four banks, the top 10 customer-owned banks, and the larger non-banks.

Lender
Advertised rate Comparison rate* Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval

VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
FixedMore details
NO UPFRONT OR ONGOING FEES

Basic Home Loan Fixed (Principal and Interest) (LVR < 70%) 3 Years

NO UPFRONT OR ONGOING FEES
FixedMore details
  • Easy, digital application process
  • Market leading app to help you pay off your loan sooner
  • No on-going fees
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of January 22, 2022. View disclaimer.

No February rate cut

Firmly in the February 'hold' camp are Westpac, Commbank and ANZ. 

Westpac Chief Economist Bill Evans said the unemployment rate decrease wasn't unprecedented but it was still enough to give the RBA reason to hold rates. 

"Over the last five years there have been six occasions when the unemployment rate has fallen in back to back months by a total of 0.2% or more," Mr Evans said.

"However, it is sufficiently strong a signal for the Board, which has emphasised the labour market as a key policy driver, to opt for a deferment of the rate cut process pending further information." 

Mr Evans said that 2020 would still see two cash rate cuts from the central bank, and the second would see the introduction of quantitative easing. 

"Westpac now expects that the Reserve Bank will delay its next cut in the cash rate to April with the final cut to 0.25% occurring in August." 

CommSec Chief Economist Craig James said the job market is in better shape than generally assumed and expected no change in the cash rate come February. 

"The hope is that the job market will continue to tighten, and this will serve to push up wages and prices," Mr James said.

"The Reserve Bank can stay on the sidelines for now. But clearly the level of interest rates is already super-stimulatory."

ANZ rounded out the big four supporters of a hold in February. 

Head of Australian Economics David Plank tweeted that ANZ had changed their call following the unemployment figures and no longer expected a February cut. 

February rate cut

NAB remains all alone in holding firm on its prediction of a February cash rate cut. 

Director of Economics Tapas Strickland conceded that the unemployment numbers made a cut less likely, but said the RBA remained some way away from its goals. 

"As for the jobs figures, the further improvement in the unemployment rate will be a welcome development for the Reserve Bank and markets moved swiftly to reprice the chances of a February rate cut, now around a 25% chance compared to 60% previously," Mr Strickland said. 

"While no doubt the timing of rate cuts for H1 2020 is less certain given the solid jobs figures, the RBA still remains some distance away from full employment and we still expect the RBA to cut rates in February as it downgrades its growth outlook on soft consumer data, amid ongoing labour market spare capacity and little inflationary pressure." 

Attention turns to inflation 

All eyes now look towards the Australian Bureau of Statistics (ABS) release of December quarterly inflation figures on 29 January. 

The RBA has repeatedly its goal is getting inflation to 2-3%, with the index currently sitting at 1.7%. 

Mr Evans said it's unlikely the new data will see the RBA hit its desired target.

"We expect that the Inflation Report, on January 29, will print 0.36% for the trimmed mean pushing the annual rate down to 1.5% from 1.6% – well short of the 2–3% target inflation range."

CommBank agreed and said most economists expect the data to show inflation well contained below the RBA's target. 


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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