Westpac now expects the Reserve Bank to cut the cash rate by 25bps in both August and November this year.


  • WPAC have revised GDP growth forecasts for 2019 and 2020 from 2.6% to 2.2%
  • With slower growth profile now expect to see the unemployment rate to 5.5% by late 2019
  • That makes a strong case for official rate cuts to cushion the downturn and, in turn, meet the RBA's medium term objectives.

This is a big move from WPAC, the bank have been calling the RBA to remain on hold for a long time. This is the first change in call from Westpac in a couple of years .

The February RBA meeting, the first for 2019, was a 'steady as she goes' meeting. But then, the next day, RBA Governor Lowe dropped a bombshell, shifting the bank to a neutral bias from the tightening bias it had been holding. This was a shock, it was not pre-empted in the Feb meeting statement. Earlier this week we got the minutes from that meeting and these clearly showed the Bank had shifted their bias at the meeting, which raised the question as to why the accompanying statement did not mention the change.

The RBA prides itself on being a 'source of stability', this creation of instability is troubling. it raises questions of the bank's credibility going forward.

RBA Governor Lowe expected to cut the cash rate

Reserve Bank of Australia Governor Lowe

Westpac have long-questioned RBA forecasts, painting them as overly optimistic. WPAC now going a step further, expecting the RBA to cut its cah rate in August and then in November 2019.

Do keep in mind that Westpac is one Australia's 'big four' banks. The bank is well positioned by viewing its own lending book to see how strains on household finances are developing. Keep an eye out now for any of the other big three to follow suit with a rate cut call.