Sally Auld, the chief economist at National Australia Bank, predicts the Reserve Bank of Australia will begin cutting interest rates in 2027 [1].
This forecast provides a timeline for Australian homeowners and businesses facing high borrowing costs after a series of aggressive monetary tightening measures.
Auld said the Reserve Bank of Australia will not raise interest rates for the remainder of 2026 [1]. This projection follows a period of volatility in the official cash rate, which the central bank set at 4.35% during its May meeting [2].
That May increase marked the third consecutive rate hike by the RBA [2]. The cumulative effect of these increases has forced Australians to pay more to service their mortgages [2].
While the RBA has maintained a restrictive stance to combat inflation, the NAB analysis suggests a plateau has been reached. Auld said the current cycle of increases is likely complete for the calendar year [1].
Economists monitor these shifts to determine when the cost of capital will decrease, potentially stimulating consumer spending and investment. The transition from a hiking cycle to a cutting cycle typically occurs once inflation targets are sustainably met, a process Auld expects to yield results by 2027 [1].
“The Reserve Bank of Australia will not raise interest rates for the remainder of 2026.”
The projection suggests a prolonged period of high borrowing costs for Australian consumers. If the RBA maintains the cash rate at 4.35% through the end of 2026, the economy will remain in a restrictive phase, prioritizing inflation control over immediate growth until the predicted pivot in 2027.
