Cash rate cuts vital for economy in 2026, says leading forecaster
Cost of living crisis easing but more Reserve Bank rate cuts are needed for growth and jobs prospects in 2026, according to leading economist.
A CUT in the cash rate is unlikely this month, but on the cards for November – and vital for the economy in 2026.
That’s the view of economist and property expert Stephen Koukoulas, who will be speaking at a prestigious industry seminar next week.
Koukoulas, a former advisor to PM Julia Gillard, will cast his eye over the economy heading into 2026 at the InfoTrack event in Sydney.
Coming as it does just a few days before the next Reserve Bank meeting, questions about the likelihood of another move in the base rate are inevitable.
“September will probably be a hold – but if quarterly inflation numbers released in October are in the groove, then we will see another 25-basis point cut in November,” he said.
Giving a snap report of where the economy is now, Koukoulas sees it as a mixed bag.
“There are clear signs that the economy in some areas is improving. We’ve got household spending picking up – albeit from a very low base,” he added.
“Building approvals – a critical part of the economy – are trending in the right direction as more dwellings are being approved.
“But we’re still well short of where we want to be.
“So, if you put those together, there are some encouraging signs that the tough times we had as businesspeople and consumers back in 2023-24, and the first part of 2025, are looking a little bit better
“We’ve had three cuts which does help the fall in inflation – and that has had a really positive impact on consumers and businesses.”
But business investment, which is another critical part of the productivity equation, is weak, he noted.
With regard to the global picture, the Australian economy has been resilient in the face of Trump Tariffs.
That central banks, including the RBA, have been cutting interest rates has helped with a more accommodated monetary policy, according to the eminent economist who says “further interest rate cuts are essential if the economy is to record decent growth into 2026 and the unemployment rate is to stay lowish.”
