Westpac pushes next cash rate hike to August, CBA sees hold
- Westpac has revised its forecast of two more RBA cash rate hikes to August and September
- It's a delay from the bank's previous call of consecutive cash rate increases in May, June, and August
- Commonwealth Bank has reiterated its position the RBA will hold the cash rate at 4.35% but notes risk skews to additional tightening
It's hardly optimistic news for mortgage holders who faced a third consecutive rise to the cash rate when the Reserve Bank of Australia made its call on Tuesday.
See also:
- Cash rate hikes by 0.25%, big four banks react
- RBA rate hike 2026: Is your lender passing it on?
- Which banks are lifting savings rates after the RBA May 2026 rate rise?
Westpac was the most hawkish of the major banks when it announced after the March cash rate hike there would be three more to come in May, June, and August.
While there was consensus on the May hike, the other big four banks are not on board with further rate increases although acknowledge the risks that could make them necessary.
June hike no longer the base case
On Friday afternoon, Westpac pulled back on its three-in-a-row scenario, delaying its next forecast cash rate increases from June and August to August and September.
Westpac's chief economist Luci Ellis, a former deputy governor of the Reserve Bank, said her team had adjusted the timing of its rates view given the RBA's post-meeting language and forecasts.
"We still expect two more RBA rate hikes after the one this week," Dr Ellis said.
"However ... we now think that the Monetary Policy Board will want to pause in June."
In her post-meeting media conference on Tuesday, RBA governor Michele Bullock said this week's cash rate increase gives the board "space" to see how the conflict in the Middle East plays out.
Dr Ellis said together with the dissenting vote [the board carried the decision to raise the cash rate 8-1], the Westpac team "read this as saying another back-to-back hike in June is no longer a better-than-50% chance".
Outlook still not rosy
But Dr Ellis said it's unlikely the board will have much time to catch its breath.
Westpac has published new forecasts based on a revised timeline for the reopening of the disputed Strait of Hormuz.
This includes a revised inflation forecast that, while only a little higher than Westpac's previous profile, sees trimmed mean inflation shift noticeably higher in the second half of 2026 than the RBA is forecasting.
Dr Ellis said Westpac's assessment is that higher fuel prices will have greater second-round price impacts than the RBA forecasts.
"Our assessment is that there will be more of this than the RBA forecasts imply, especially in areas such as home-building costs," she said.
Westpac is basing its call on its own forecasts for oil and fuel prices which track "somewhat higher" than the futures curve the RBA is using.
Dr Ellis said if things turn out as Westpac expects, two further rate hikes are more likely than one.
She also expects the RBA's reaction to second-round inflation will be later than previously thought, pushing the timing of the two hikes back.
CommBank calls RBA hold
Meantime, Commonwealth Bank economists reiterated their view the Reserve Bank would hold the cash rate at 4.35% but said "the clear risk sits with additional tightening".
Economists from Australia's two largest banks noted there would also be key events between now and the June meeting, including the federal Budget and National Wage Case decision, that could add to inflationary pressures.
CommBank also said it would be watching for developments in state budgets, wage outcomes, consumer activity, and the second quarter inflation print, due to be released on 29 July.
It said depending on the data, it could strengthen the case for another hike, most likely in August.
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| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
