The big bank consensus cracked this week. ANZ, NAB and Commonwealth flipped their Reserve Bank forecasts to expect a 25-basis-point hike by November, most likely at the 5 November meeting. Westpac held its ground: no move this year.
The trigger was Wednesday’s inflation print. Headline inflation eased to 3.5% in July from 3.8% in June. Trimmed mean inflation, the RBA’s preferred gauge, sat at 3.6% for the second straight month, above the central bank’s 2–3% target band and above what most economists had penciled in.
Within 24 hours, three of the four majors tore up their hold calls. Westpac didn’t.
Where the split sits now
ANZ moved first, with economists declaring a November hike the new base case. NAB’s chief economist placed the bank’s forecast under formal review and said the risk skewed toward an even earlier move. Commonwealth had called the tightening cycle done on Tuesday; by Thursday it expected 4.6% by November, with September not ruled out.
Westpac’s senior economist says the July data came in hot but doesn’t clear the bar for another hike. The bank’s base case remains on hold through the rest of the year.
Interbank futures priced a roughly 78% chance of a hike by November after the data landed, up from under 50% beforehand.
What’s driving the three-bank shift
The banks that flipped cite a handful of reinforcing pressures. Capacity constraints remain visible across the economy. Businesses are passing through higher input costs tied to lingering Middle East supply disruption. The Fair Work Commission’s recent award wage decision is feeding into services prices, especially in labour-heavy categories like hospitality and healthcare. Households are still spending by drawing on savings, offset accounts and redraw facilities despite higher borrowing costs.
Housing contributed the largest single share of July inflation, rising 5% year-on-year according to the ABS. One major bank economist noted the July print puts inflation on track to exceed the RBA’s own forecast for the September quarter. Another described the trimmed mean result as intolerably high and shifted to expect a September move outright.
Westpac’s contrarian view
Westpac acknowledges the upside surprise but argues the detail beneath the headline doesn’t justify tighter policy yet. New dwelling costs and rents came in broadly as expected; the housing downturn is limiting builders’ pricing power even as trade material costs edge higher.
The upside, Westpac says, concentrated in durable goods, motor vehicles, household items, and in household services like restaurants and domestic travel. The bank attributes part of that to the timing of sales periods and rising semiconductor prices, rather than a broad-based pickup in price pressure.
Westpac also points to softer-than-forecast labour market and wage growth as reasons the RBA can afford to wait. Market services inflation remains above target, but a cooling jobs market lowers the probability the central bank pulls the trigger in November.
This isn’t the first time Westpac has stood alone. The bank was the only major to forecast an August hike earlier this year. That call proved wrong, the RBA held in August. Whether Westpac gets it right this time becomes clear at the 24 September meeting.
Trade-offs for borrowers
If the majority camp is right and the RBA hikes 25 basis points in November, a borrower with a $600,000 variable loan at the current average rate would see repayments rise roughly $90 per month. A second hike, possible if inflation stays sticky, adds another $90.
If Westpac is right and the RBA holds, borrowers on variable rates get breathing room through the end of the year. Fixed-rate borrowers rolling off low pandemic-era deals face a step-up either way, but the size of that step depends on whether the cash rate sits at 4.35% or 4.6% when they refinance.
The risk for property buyers: if rates rise, serviceability tightens further and borrowing capacity shrinks. For investors, another hike pushes more holdings into negative cashflow territory unless rents keep climbing at the current pace, which vacancy data suggests is unlikely in most markets outside Perth and Adelaide.
For context, markets were pricing a 97% chance of a November hike just days ago as the big bank forecasts rolled in. If that move lands, the impact is roughly $183 per month for a median household over two hikes.
The weighting question
What separates Westpac from the other three isn’t the data, they all saw the same July CPI print, it’s which pieces of the picture each bank gives more weight.
The three banks that flipped emphasise persistent capacity constraints, cost pass-through from wages and supply shocks, and household resilience via drawdowns. Westpac emphasises category-level detail in the CPI basket, softer jobs data, and builders’ constrained pricing power.
Both camps are working with probabilities, not certainties. The RBA has said repeatedly it will hike if upside risks to inflation are realised. The question is whether July’s print meets that threshold or whether it reflects temporary, category-specific factors that fade over the next quarter.
The answer matters because the distribution of possible outcomes has narrowed. A month ago, the consensus was no move this year. Now three of four majors see a hike as more likely than not, and one sees it as close to certain. Westpac sees a higher probability the RBA holds but hasn’t ruled out November entirely.
Key numbers
- Trimmed mean inflation: 3.6% in July, unchanged from June, above the RBA’s 2–3% target
- Interbank futures: ~78% chance of a hike by November post-data release
- Housing inflation: 5% year-on-year, the largest single contributor to July’s CPI
- Cash rate impact: roughly $90/month per $600k loan per 25bp hike
What happens between now and November
The RBA meets on 24 September. Markets will parse every line of the statement for hints about November. If the bank softens its language around upside inflation risks, that tilts the odds back toward Westpac’s hold call. If the statement sharpens the warning or flags more persistent price pressure, November becomes the likely move.
Between now and then, watch August jobs data (due mid-September) and any further detail on services inflation. A sharp fall in employment growth or a surprise drop in wage pressures gives the RBA cover to hold. Resilient jobs and sticky wages tilt the balance toward the majority view.
For borrowers, the practical step is the same either way: stress-test your position at 5% or higher, even if you think the RBA holds. If you’re rolling off a fixed rate in the next six months, get indicative quotes now so you know the landing point under each scenario. If you’re buying, build a 50-basis-point buffer into your borrowing capacity, half the gap between the current cash rate and where it could sit if the three-bank view plays out.
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General info, not financial advice.
