Forecasts of the major banks before the decision on Tuesday

The Reserve Bank of Australia (RBA) is expected to keep the base rate at 4.35 percent at its meetings on Monday and Tuesday. Many homeowners are now waiting impatiently for interest rate relief, and the four major banks are divided on when exactly this will come.

Australia's unemployment rate remained stable at 4.2 percent in August, dampening hopes of a near-term rate cut. Australia's largest bank, the Commonwealth Bank, is still hoping for an RBA rate cut this year, but has pushed back its forecast from November to December.

All economists and experts surveyed for Finders Cash Rate Survey expect the RBA to keep interest rates unchanged at its September meeting.

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When do the four major banks expect to lower interest rates?

Commonwealth Bank expects the RBA to cut the base rate in December 2024. It expects there to be five cuts of 0.25 percent each by the end of 2025, bringing the base rate down to 3.10 percent.

Westpac assumes that there will be a reduction in February 2025, a total of four times by 0.25 percent, in order to reduce the key interest rate to 3.35 percent.

GRAB assumes that this will happen in May 2025, but says that February is also possible with five cuts of 0.25 percent to 3.10 percent.

ANZ has forecast a cut for February 2025, with a total of three cuts to bring the key interest rate down to 3.60 percent.

The markets are calculating four interest rate cuts within the next twelve months, with the first cut of 0.25 percent expected in February 2025.

Canstar has calculated that with four cuts in 2025, the repayment rates of a homeowner with $600,000 of debt and a term remaining, paying principal and interest, would fall by $357 by the end of the year.

Over the next 15 months, through the end of 2025, they would pay the bank $2,846 less in interest than if there were no cuts.

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What did the RBA say?

RBA Governor Michele Bullock has repeatedly told borrowers not to expect a rate cut “anytime soon.”

The September meeting came immediately after the US Federal Reserve cut interest rates by 0.5 percent, its first rate cut in four years.

Bullock had previously stated that the bank would not be influenced by interest rate cuts in other countries.

“Currently, interest rates in the United States are higher than ours. In fact, we have been criticized for that,” she said in August.

“But we made a conscious decision to reduce inflation without plunging the economy into recession and driving up unemployment.”

Last week, RBA Deputy Governor Sarah Hunter noted that the labour market was “above full employment”, the maximum level of employment required for low and stable inflation.

What do other experts predict?

More than two-thirds of the economists and experts surveyed by Finder expect the first rate cut to come in the first three meetings of next year. 44 percent predict the first cut will come in February.

“Barring significantly higher unemployment, lower underlying inflation or a financial shock, the RBA is likely to take a wait-and-see approach over the next few months as it still sees excess demand and inflation as too high,” said Shane Oliver, AMP's chief economist.

“But weakening demand, employment and inflation will likely lead to interest rate cuts starting in February.”

Economist Saul Eslake said he has long believed the RBA will keep interest rates unchanged in 2024 and “will not start cutting them until February 2025 at the earliest”, regardless of what other central banks do.

Eslake said the RBA had “chosen to tolerate inflation above its target range for longer” than its peers in order to “preserve as much as possible of the successes in reducing unemployment and underemployment in 2021 and 2022”.

“Because interest rates have not been raised as much as in other countries, inflation has not fallen as quickly, but unemployment has not risen as much as in the US, the UK, Canada and New Zealand. Therefore, interest rates will not fall as quickly and as much as in those countries,” he said.

The RBA's decision will be made at 2:30 p.m. on Tuesday, followed by a press conference with Bullock.

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