RBA expected to hold, confidence lifts modestly as cost pressures ease

RBA WatchConfidence lifts modestly as cost pressures ease

The market expects the RBA Monetary Policy Board to hold the cash rate steady at 4.35% at next week’s June meeting, given mixed inflation and labour-market data and with underlying inflation still above the RBA’s own forecasts. The market view is that further hikes will follow in August and September, though these risks are skewed to the downside — zero or one additional hike is now seen as more likely than three.

• Westpac has lowered its oil price assumptions across Q2–Q4 2026 (the largest cut in Q3) on easing supply-risk premia and softer demand, materially reducing its petrol and diesel forecasts. It revised its headline inflation peak down from 5.0% to 4.7%, now expected in Q4, with year-ended inflation easing gradually to 2.8% by end-2027.
• Business confidence continued to retrace losses following March’s sharp decline, rising 10pts to -14 in the May NAB Business Survey (in the field 23–30 May), capturing more reaction to the Middle East conflict and the FY2027 Federal Budget. The improvement was likely supported by easing cost pressures, though confidence remains a deeply pessimistic 18pts below its long-run average — a level consumers also continue to share amid acute cost-of-living concerns.

Consumer ConfidenceConfidence rises 2.0pts

HousingDwelling values: stock hits record $12.8 trillion

• Australia’s residential dwelling value rose 2.5% (+$315.9 billion) to a record $12.8 trillion in the March quarter, moderating from the 3.2% gain in late 2025. The stock is 11.9% higher year-on-year.
• The mean dwelling price rose $22,300 to $1,111,100 and dwelling numbers grew by 54,200 to about 11.5 million. NSW retains the highest mean price at $1,324,800.
• Western Australia led with mean prices up 7.2% (+$73,700) and Queensland rose 4.6% (+$49,800). Victoria was the only state to fall, easing 0.3% (-$2,400).
• The moderation echoes the broader cooling in the Q1 National Accounts, though strong price growth in the west and north continues to underpin dwelling wealth.

Foreign ExchangeAUD steady near 0.70 ahead of RBA

• The Australian dollar held around US$0.70 and was on track to finish the week little changed, as markets await the Reserve Bank’s policy decision next week. The currency has settled into a narrow range, caught between a softening domestic backdrop and an improving global risk tone.
• Markets are increasingly pricing the possibility that the central bank has already concluded its tightening cycle, as the three rate hikes delivered this year begin to filter through the economy. A run of softer releases, from Q1 GDP to housing prices, has reinforced expectations that policymakers will keep the cash rate unchanged at 4.35% on Tuesday.
• Investors have also scaled back bets on an August move, with the implied odds falling sharply from above 80% a month ago to around 35%. The May CPI report, due on 24 June, looms as pivotal after an unexpectedly soft April inflation reading, as policymakers look for clearer evidence on whether price pressures remain firm.
• Global risk appetite improved after US President Trump said a deal with Iran could be reached as early as this weekend, having postponed planned strikes. The easing in geopolitical tension has lent the Aussie modest support, helping to offset the drag from the dovish repricing of the domestic rate outlook.

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Sources: Westpac Economics (Weekly, 15 June 2026), NAB Business Survey (May 2026), Cotality dwelling values, ANZ-Roy Morgan. This summary is for informational purposes only and should not be considered financial advice. Always consult a professional before making investment decisions.