Australia’s 2025 Economic Forecasts: What the Big Four Banks Are Predicting
As Australia navigates the complexities of 2025, the nation’s economic trajectory remains a topic of keen interest. With global uncertainties, domestic challenges, and shifting monetary policies, understanding the forecasts of Australia’s major banks—Commonwealth Bank (CBA), Westpac, National Australia Bank (NAB), and ANZ—is crucial for businesses, investors, and homeowners alike.
Slower Growth Ahead
Australia’s economic growth has shown signs of slowing. The first quarter of 2025 saw a modest 0.2% increase in GDP, trailing the anticipated 0.4% and marking a deceleration from the previous quarter’s 0.6% rise . Westpac has adjusted its 2025 growth forecast down to 1.9%, citing weaker external demand and subdued consumer spending.
Interest Rate Cuts on the Horizon
In response to economic pressures, Australia’s major banks anticipate a series of interest rate cuts. Westpac has revised its forecast to four 0.25% cuts, bringing the cash rate down to 2.85% by mid-2026. NAB expects five cuts, starting in May 2025 and continuing into early 2026, reaching a terminal rate of 3.1%. ANZ and CBA also foresee reductions, with ANZ predicting three cuts by August 2025.
Global Tensions Impacting Inflation
Geopolitical events, such as the escalating conflict between Israel and Iran, have introduced new inflationary pressures. Rising oil prices are contributing to increased fuel costs, which may counteract efforts to reduce inflation. These developments could influence the Reserve Bank of Australia’s (RBA) monetary policy decisions in the coming months.
Implications for Homeowners
For homeowners, the anticipated rate cuts could offer some relief. If Westpac’s forecast materializes, a borrower with a $600,000 loan could save up to $4,200 annually or $350 monthly in repayments . However, experts advise borrowers to explore better deals, especially if their current variable rates exceed 6%, as banks compete to attract customers with lower fixed interest rates.
Bank Earnings Resilience
Despite economic headwinds, Australia’s major banks have demonstrated resilience. Fitch Ratings reports that the financial results for the fiscal first half of 2025 for ANZ, NAB, and Westpac were in line with or exceeded expectations, supporting their current ratings . However, NAB’s net interest margin is expected to contract slightly, while Westpac’s is forecasted to remain stable.
Looking Ahead
As we progress through 2025, Australia’s economic landscape remains dynamic. While challenges persist, the coordinated efforts of the RBA and major banks to adjust monetary policies aim to steer the economy toward stability. Stakeholders across sectors should stay informed and agile to navigate the evolving economic environment
