anz-nab-cash-rate-projections.jpg

ANZ and NAB have revised their monetary policy projections and are now expecting the cash rate to hit 4.1%.

According to their forecast, the Reserve Bank of Australia is expected to increase the cash rate in the next three months by 25bps each, which means the cash rate will sit at 4.1% by May.


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees Max LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
$2,408
Principal & Interest
Variable
$0
$530
90%
Featured 4.6 STAR CUSTOMER RATINGS
  • Low rates for purchase and refinancing
  • Simple online application process
  • No fees, unlimited redraws, 0.10% offset
Disclosure
5.99% p.a.
5.90% p.a.
$2,396
Principal & Interest
Variable
$0
$0
80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Disclosure
6.14% p.a.
6.16% p.a.
$2,434
Principal & Interest
Variable
$0
$350
60%
  • Get a tailored quote in as little as 3 minutes
  • Complete your application in 15 minutes
  • Get an answer fast from a banking specialist who will work with you through the application process
Disclosure
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

Important Information and Comparison Rate Warning


ANZ believes inflationary pressures are still high

ANZ senior economist Felicity Emmett said the 4.1% cash rate looks likely to be required to bring inflation back down towards the target band of the RBA, which is at 2% to 3%.

“The Q4 CPI report showed inflationary pressures remain intense — non-tradables and services inflation accelerated, and both are now annualising around 8.5% year-on-year. These measures better reflect underlying and domestically driven inflationary pressures,” she said.

On top of this, activity seems to be more resilient than expected, with business conditions bouncing strongly in January.

“ANZ card spending data suggests there is still appetite for discretionary purchases, with strong growth in travel spending offsetting weakness in discretionary goods spending in early 2023,” Ms Emmett said.

“Given that price pressures are intense and look to remain stronger for longer, we have lifted our 2023 inflation and wage growth forecasts and see the higher cash rate as necessary to return inflation to the top of the target band by late-2024.”

Given these, the RBA is expected to only start easing by November 2024.

NAB sees economic resilience as driver of further rate hikes

NAB group chief economist Alan Oster said strong prints for wages and inflation are likely to continue in the near term.

“The subsequent prints of monthly and quarterly CPI measures for Q1 are likely to show some easing but will remain elevated, motivating the RBA Board to respond with further rate rises in April and May to take the cash rate to 4.1%,” he said.

However, a strong case remains for the central bank to pause or slow down their hiking cycle soon to provide time for the successive adjustments to flow through.

“Such an approach would leave open the possibility of raising rates further later in the year if inflation did not moderate sufficiently,” he said.

“With rates now expected to peak above 4%, we see policy as moving deeper into restrictive territory.”

Based on NAB’s projections, consumption is likely to slow sharply as 2023 progresses, weighing on economic growth.

“A cash rate peak above 4% will have a significant impact on economic growth, and we expect GDP to be below 1% over both 2023 and 2024 despite the more optimistic near-term outlook,” Mr Oster said.

“We also expect the RBA will need to cut interest rates in 2024 to closer to neutral to support growth as inflation moderates.”