Westpac Banking now forecasts the Reserve Bank of Australia will raise its cash rate by 25 basis points to 4.6 percent at the November meeting, reversing its previous expectation of a rate reduction.
Luci Ellis, Westpac's chief economist and former RBA assistant economic governor, detailed the shift in a research note published Tuesday. Strong household incomes and a surge in data center investment are the primary drivers. The data center boom—including renewable electricity generation and distribution infrastructure—will drive business investment and GDP growth while keeping disinflation limited and price pressures elevated.
Ellis said the RBA is unlikely to lift rates in September and will wait until November to assess additional economic data before moving.
The housing market appears weaker than Westpac's previous forecasts, but the broader boost from technology-sector spending more than offsets any drag on consumer spending.
Westpac continues to expect three rate reductions of 25 basis points each, beginning in August 2027.
The Westpac-Melbourne Institute consumer sentiment survey showed a sharp decline, reflecting rising fuel prices and growing fears of future rate hikes. The divergence underscores the challenge facing policymakers: job advertisements remain strong while sentiment deteriorates.
