Westpac boss Anthony Miller says borrowers will probably have to wait until May next year for interest rate relief as the Reserve Bank grapples with the twin challenges of higher inflation and rising unemployment alongside an acceleration in house prices.
The country’s second-largest mortgage lender delivered $6.9 billion in full-year profits on Monday after the latest shock inflation figure last week wiped out market expectations of further interest rate cuts this year, prompting some to predict a prolonged period of stability for Australian rates.
Westpac chief executive Anthony Miller said he was optimistic about the outlook for Australia’s economy.Credit: Oscar Colman
As the Reserve Bank board prepares to meet on Tuesday, when it is widely expected to leave the cash rate unchanged at 3.6 per cent, Miller said the RBA faced a “delicate balance” in managing the recent increases in unemployment and inflation.
While some banks believe Australians are at the low point for rates in this cycle of RBA moves, Westpac is betting further cuts are still warranted because policy is restrictive.
“We still think there’s another two rate cuts, but they’ll be in May and August of next year, just on the basis that, obviously, the Reserve Bank’s likely to want to see … a bit more [evidence] that inflation is really landing where it needs to land,” Miller said.
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Another key trend acknowledged by Miller was the brisk growth in house prices, which rose at their quickest pace in more than two years in October, pushed along by government help for first home buyers and past rate cuts.
Westpac forecast Sydney dwelling price growth would accelerate to 8 per cent in 2026, from 5 per cent this year. In Melbourne, where prices have risen more slowly in the past few years, Westpac forecast price growth of 10 per cent in 2026, up from 4 per cent in 2025.
Miller said an expanded government scheme to help first home buyers, which started on October 1, had fuelled strong demand from this cohort of buyers, and the bank was also keen to lend more money to property investors. Miller said Australia needed to build more homes that cost about $500,000 – though he acknowledged that doing this was complex and required action in areas such as supply chains, the cost of labour, and approval times.
