Bendigo Bank's November Economic Update

In Bendigo Bank’s latest Economic Update, our Chief Economist David Robertson outlines:

• Lower rates expected but cut pushed back “around six months”
• All eyes on impending jobs data for rate clues
• Extreme global tariff risks recede
• Growth forecast remains modest for ‘26, but upside for 2027.

Homeowners hold breath for new year cash rate cut

While the latest inflation numbers squashed any hopes of a Cup Day cut and with a pre-Christmas cut now also off the table homeowners will need to wait til at least May next year for rate relief, Mr Robertson said.

“There is still an expectation of lower rates ahead, but the latest inflation numbers were a setback with broad-based price pressures across housing costs, market services and grocery inflation,” Mr Robertson said.

“This has pushed back the next RBA cash rate cut by around six months - most likely to around May next year.”

While the likelihood of another cash rate cut remains, a deeper easing cycle is unlikely, Mr Robertson said.

“It’s still very likely that we get another cut to 3.35%, taking us 1% below last year’s peak, but the case for a deeper easing cycle is now less convincing partly due to the uncertain outlook for inflation.

“Unlike the US Federal Reserve, the Bank of Canada and the Reserve Bank of New Zealand who all cut their rates in October, the RBA will now need to see more data before being in position to follow suit.”

There are also some more positive signs currently holding back a cash rate cut, such as the recent pickup in household consumption, some improvements in business conditions, and record highs for property values and stock markets, Mr Robertson said.

Weaker jobs data makes strongest case for a cut

“The most compelling argument for at least one more RBA rate cut in 2026 is recent weaker jobs data, with the unemployment rate rising to 4.5% in September, its highest level since 2021 and the risk of this trend continuing over the next 12-18 months,” Mr Robertson said.

“Interestingly the updated RBA forecasts released yesterday still only predict unemployment peaking at 4.4%, so the next few months’ jobs numbers will be important to see if the RBA are right in their assumption that labour markets will remain relatively tight.”

Extreme global tarriff risks recede

While the global backdrop remains highly complex and challenging, some of the more “extreme risks” from overseas due to tariffs have receded compared to three to six months ago.

There are some further positive international indicators, Mr Robertson said.

“After some setbacks last month, the US-China trade relationship now appears to be in a lasting truce, and the latest economic data from our major trading partners in Asia continues to show resilience.”

However, the US remains a pocket of strong economic turbulence.

“The US isn’t getting any official data as their government shutdown continues into its second month, but labour markets in the US do appear to be at risk, hence the need for their recent rate cut below 4%,” Mr Robertson

AI impact prompts market optimism

Financial markets continue to take an optimistic view on the short to medium term impact of AI and other emerging technologies on business investment and stock valuations, with record highs for stock market indices in a wide range of locations, Mr Robertson said.

However, he notes the big question ahead is: What will the AI output and productivity boom look like?

Growth forecast remains modest

In Australia, GDP growth has picked up in 2025 but the latest RBA forecasts for growth in 2026 and 2027 are relatively modest, Mr Robertson said.

“Private demand is expected to increasingly take the reins of growth from public spending next year, but the interplay between AI, productivity and output will be a key driver for the path ahead,” Mr Robertson said.