- NAB predicting 50 basis point rate cut in May
National Australia Bank is predicting a super-sized interest rate cut in May and the most generous relief for borrowers since the Global Financial Crisis as a result of Donald Trump‘s tariffs.
NAB, Australia’s biggest business lender, has the Reserve Bank slashing rates by 50 basis points on May 20 – taking the cash rate from 4.1 per cent to 3.6 per cent.
It also has the RBA continuing to cut rates at its meetings in July, August, November and February.
This would take rates back to 2.6 per cent for the first time since November 2022.
The 175 basis points of relief in a year, factoring in February’s cut, would mark the deepest cut in such a short time since the Global Financial Crisis in late 2008 and early 2009.
A borrower with an average, $600,000 mortgage would save another $564 in monthly repayments compared with now should NAB’s prediction materialise.
NAB chief economist Sally Auld said Trump-driven chaos would force the RBA to act more dramatically on May 20, given it now only met eight times a year instead of 11.
‘With longer periods between RBA board meetings now a feature of the RBA calendar, some flexibility on the policy front has been lost, especially when developments are moving fast,’ she said.
National Australia Bank is predicting a super-sized rate cut in May and generous relief until next year as a result of Donald Trump ‘s tariffs (pictured is Sydney’s Pitt Street Mall)
The Trump Administration is smashing China, Australia’s biggest trading partner, with new 125 per cent tariffs after it responded in kind by hiking duties on American imports to 84 per cent.
While the US government is pausing other tariffs for 90 days, an assault on China could seriously weaken its demand for Australia’s biggest export, iron ore.
Less need for the commodity used to make steel risk wounding business confidence in Australia, in turn leading to higher unemployment as firms stopped hiring and investing.
This would be damaging even if Trump undoes the 10 per cent tariffs on Australia.
‘A weaker global backdrop and the impacts of weaker consumer and business confidence have now shifted the distribution of risks away from a tighter labour market and towards the risk of a rise in the unemployment rate,’ Ms Auld said.
Deep rate cuts, as NAB is predicting, means a borrower with an average, $600,000 mortgage would go from paying $3,691 a month in repayments to $3,127.
This $564 saving would occur as a typical variable rate fell from 6.24 per cent to 4.74 per cent.
Canstar data insights director Sally Tindall said the major banks were likely to also keep slashing term deposit rates, with 19 banks cutting a term deposit rate during the past week.
‘We expect term deposit rate cuts will keep ramping up in the lead-up to the RBA’s next meeting in May, unless the tariff war cools considerably,’ she said.
The Trump Administration is smashing China , Australia’s biggest trading partner, with new 125 per cent tariffs after it responded in kind by hiking duties on American imports to 84 per cent (pictured is US President Donald Trump)
