NAB chief economist Sally Auld unpacked recent revisions to the major’s cash rate forecast in a webinar to brokers on Wednesday (26 November).
The Reserve Bank of Australia’s (RBA) rate-cutting cycle appears to have run its course for the foreseeable future, with analysis from National Australia Bank (NAB) chief economist Auld suggesting it may even be time to prepare for a shift in the opposite direction.
Speaking to brokers on a NAB Commercial Economics Webinar on Wednesday (26 November), Auld said higher-than-expected quarterly inflation data suggests borrowers shouldn’t expect to get much relief in terms of interest rate cuts from the RBA.
“We have a period which is going to feel a little bit uncomfortable for the Reserve Bank over the next couple of quarters where inflation is sitting too high. It probably means that they won’t be doing anything on rates, and they definitely won’t be cutting rates,” she said.
“This is a central bank that will face into above-target inflation for the first couple of quarters, a labour market that’s fully employed and a growth story where we’re getting back to trend growth. It’s pretty hard to argue against that backdrop that this economy needs lower rates.”
Auld also pointed to the RBA’s admission in its most recent minutes that it is uncertain whether current rate settings are still restrictive, as reported by The Adviser sister brand Broker Daily.
“One of the things they’re really trying to grapple with is whether or not a cash rate of 3.6 per cent is restrictive, whether it’s neutral – i.e. not acting as a headwind or a stimulant – or possibly whether it could be a setting of monetary policy that’s providing some broad sense of support to the overall economy,” she added.
“While they’re dealing with inflation that’s a bit high, and I guess some uncertainty around actually what the setting of monetary policy is, that’s a central bank I think that won’t be doing much until it has a better understanding.”
She reiterated NAB’s forecast that the rates remain on hold for the foreseeable future.
“What we’re really going to be watching carefully is whether we’re getting any signals from the data that tell us that maybe this is an economy that’s starting to push up against capacity constraints a bit more quickly than people anticipated,” she said.
Auld also noted the impact of a “soggy” demand environment with soft household consumption.
“The Reserve Bank is not going to like this story. This is why I’m pretty comfortable sitting here telling you that I think the rate cut cycle is over and that we should start to watch for and start to possibly plan for the possibility that rates go up next year,” she added.
“That’s not in our forecast at the moment, but as you can see there are a few things that are starting to flash orange.”
Inflation spikes amid housing cost rise
NAB’s webinar came as the Australian Bureau of Statistics (ABS) released inflation data for the 12 months to October 2025, with housing costs a key driver.
The ABS reported a 3.8 per cent increase in the CPI for the 12 months to October 2025, up from 3.6 per cent reported in the year to September 2025.
Housing costs rose 5.9 per cent during the reference period, driven by higher costs for both electricity (up 37.1 per cent) and rents (up 4.2 per cent).
This data release comes ahead of the RBA’s December policy meeting, which is due to take place on December 8–9.
Investor scrutiny
Auld also touched on the recent surge in investor lending and the possibility of the Australian Prudential Regulation Authority (APRA) stepping in to intervene.
“When we look at the actual numbers, what we find is that the value of lending to investors has jumped by almost 20 per cent in the last three months, so the three months to September. If you times that by four, you get a very big number, and a number that’s probably not where the Reserve Bank and bank regulators would actually like that to be,” she said.
“I do think it’s quite possible that we see maybe some macroprudential regulation appear from APRA. There’s certainly discussion, I think, in the broader market, that could be coming down the pipe. And I suspect the focus of those regulations, if they do actually land, is more likely to be investor lending rather than owner-occupier.
“That’s largely because we know that the government is actually trying to encourage more first home buyers into the market. They started their 5 per cent deposit scheme in October, and actually some of the anecdotal evidence that we’ve heard from real estate agents is that part of the strength of that investor lending in the third quarter is trying to front run what they believed would be a pull forward in demand in October from first home buyers.
“So I think that space will be interesting to watch.”
[Related: Another major bank rules out more rate cuts]
