SYDNEY, May 11, 2026, 00:03 (AEST)
- Westpac now sees RBA rate increases in August and September, not June and August.
- The bank says fuel costs could keep underlying inflation above the RBA’s forecast path.
- The call lands after Westpac reported a profit miss and higher bad-debt provisions.
Westpac Banking Corporation has pushed back its forecast for the Reserve Bank of Australia’s next two rate rises, saying it now expects increases in August and September rather than June and August. Chief economist Luci Ellis wrote that a June move was “not a zero chance” but “should not be the base case,” after the central bank signalled it had room to assess the Middle East shock. Westpac
The timing matters because Westpac is not calling an end to the rate cycle. A June pause would take some heat off borrowers in the near term, but the bank is still telling clients to prepare for tighter policy later in the year.
The RBA raised the cash rate by 25 basis points to 4.35% on May 5 and said higher fuel prices were already adding to inflation. It also warned of “second-round effects” — the risk that fuel and energy costs get passed into the broader price of goods and services. Reserve Bank of Australia
Westpac’s case rests on that pass-through. Ellis said the bank’s inflation forecasts use oil and fuel-price assumptions that sit above the futures curve used by the RBA, and that home-building costs could be one area where higher non-labour costs show up. Trimmed mean inflation, the underlying measure that cuts out the most extreme price moves, is the number to watch.
The rate call also gives Westpac’s own earnings a sharper edge. The bank last week reported A$3.4 billion in statutory net profit, A$3.5 billion excluding notable items, a 12.4% common equity tier 1 ratio — a core capital buffer against losses — and a 77 Australian cents fully franked interim dividend. Chief Executive Anthony Miller said Westpac had taken a “prudent approach” and increased provisions even as customer stress declined. Westpac
Reuters reported that Westpac’s A$3.41 billion first-half net profit missed the A$3.47 billion Visible Alpha consensus estimate, with credit impairment charges rising to A$443 million from A$250 million a year earlier. Net interest margin, the spread between what a bank earns on loans and pays for funding, slipped to 1.89% from 1.92%.
The big-bank read is split. Commonwealth Bank of Australia’s head of Australian economics, Belinda Allen, said CBA’s base case is for rates to stay on hold for the rest of 2026, while adding that “a further rate hike cannot be ruled out.” NAB said it had the RBA on hold at 4.35% for now, but that risks were tilted toward another adjustment. CommBank
But Westpac’s forecast can move. If the Middle East conflict eases faster and fuel prices fall, the RBA may have less reason to lift rates again; if the shock lasts, the mix could be worse — higher inflation and slower growth. The RBA’s own baseline outlook assumes oil prices recede over coming quarters and the cash rate reaches 4.70% by the end of 2026.
For Westpac shareholders, the issue is no longer just whether loan growth holds up. It is whether higher rates, weaker margins and rising provisions can all be managed at once without a sharper hit to households and business borrowers.
That makes the August meeting the next live marker. June is no longer Westpac’s base case, but the bank has not taken another hike off the table.
