ANZ joins the line up: Now predicts July RBA cut

Retail sales data released today was the nail in the coffin for the smallest of the big four banks, with weak consumer spending pushing it to forecast a July rate cut. 

The RBA board will meet on Monday to decide whether to move the cash rate from its current 3.85%, with its decision to be announced on Tuesday afternoon.

ANZ head of Australian economics Adam Boyton said a July cut will likely represent “the path of least regret” for the central bank, compared to waiting until its August meeting.

“Still, we think the meeting will be a much closer call than market pricing would suggest,” Mr Boyton continued.

According to the ASX Rate Indicator, just 3% of market traders were not pricing in a cut as of Tuesday afternoon.

All four majors now tip a cut

Mr Boyton's tone closely echoed that of Westpac chief economist and former RBA assistant governor Luci Ellis, who confirmed Westpac's view had shifted last week.

“The RBA's thinking in May was that it did not plan to do back-to-back cuts but would wait for the quarterly CPI ahead of its August meeting,” she said on Thursday.

"And they still might do that, but it is harder to justify now."

CommBank also updated its forecasts on the back of inflation figures released last week, while NAB has long predicted a July cut.

Retail sales – the driving force behind ANZ’s about-face – were largely flat in May, lifting just 0.2% month-on-month to miss consensus forecasts, Australian Bureau of Statistics (ABS) figures reveal.

Consumer spending was “driven mainly by a bounce-back in clothing purchases,” ABS head of business statistics Robert Ewing said.

“Retail spending was otherwise restrained this month, with a drop in food-related spending and flat results across household goods.”

August cut still expected, February off the table

Despite the revised short-term forecast, ANZ still anticipates an August rate cut, but has scrapped its forecast for a February 2026 cut.

If correct, that would leave the cash rate bottoming out at 3.35%.

“Regardless of what decision the board reaches next week, we still expect an extended pause once the cash rate reaches 3.35%,” Mr Boyton said.

“Moving beyond 3.35% in quick succession, in the absence of a global or domestic shock, would run the risk of needing to tighten policy in late 2026 or early 2027.”

ANZ's economic call follows big fixed rate cuts

ANZ's change of heart follows fresh cuts to its fixed mortgage rates, with the bank slashing as much as 35 basis points across its suite of home loan products on Wednesday morning.

Select borrowers fixing for two years can now access rates as low as 5.19% p.a. – the lowest fixed rate advertised by any big four bank.

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