In an update which will bring relief to homeowners, National Australia Bank is predicting big base rate cuts over the next few months.
In Chief Economist Sally Auld’s Economic May update, released today, she signalled cuts by 100 base points in total by August.
“We expect the RBA to cut by 50bps in May, followed by 25bps in July, August, November and February,” Auld said.
If those cuts were all passed on to mortgage holders by banks and other financial firms, it could see interest rate cuts of 1.5 per cent on mortgages in total between now and February 2026.
However, NAB says such moves “requires the RBA to shift its thinking on a couple of fronts”.
“First, an acknowledgement that risks to inflation are no longer balanced, but rather, biased to the downside as a consequence of trade diversion and weaker global growth,” it said.
“Second, a shift in mindset towards a less cautious approach to their policy strategy; that is, a willingness to act quickly and boldly.”
It said the election result, which sees Labor stay in power after a landslide, provides markets with “more certainty and predictability”.
However, NAB said it has downgraded its global growth outlook in recent weeks despite the hope of more rollbacks of Trump’s Liberation Day tariffs.
“A shock of the nature and magnitude that shifts in US trade police have imposed is unprecedented in the working lives of most people, let along economists of others who indulge in the forecasting process,” it said.
NAB also said last month it predicted rate cuts were on the way.
