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Bendigo Bank's October Economic Update

1 October 2025

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

  • Clouds gather over Melbourne Cup Day cash rate cut
  • All eyes on quarterly CPI and jobs data for cash rate clues
  • Household spending and steady jobs help power Aussie economy
  • Markets march on despite era of global uncertainly

Rates on hold, clouds gather over Melbourne Cup Day cut

While yesterday’s lack of cash rate movement came as no surprise, a question mark now hovers over a potential cash rate cut on Melbourne Cup Day in November, Mr Robertson said.

“Our forecasts are unchanged for a ‘shallow’ RBA easing cycle back to a more neutral rate around 3.25%, but the timing of the next cut is under question,” Mr Robertson said.

A jump in the August inflation indicator plus sharp rises in other key categories has sent mixed signals. However, for the pundits, Mr Robertson said a Cup Day cut on November 4 remains popular but is a drifting favourite.

“The full quarterly CPI numbers out on October 29 will be the key event to verify this timing. So barring a significant jump in core inflation, the easing cycle should continue. But it’s a complex environment. The RBA Governor did warn in her press conference that ‘inflation may be persistent’. Time will tell.”

Household spending and jobs power economic growth

Economic growth is running ahead of RBA forecasts thanks to a rebound in household spending, and labour markets remain relatively solid with the unemployment rate still around 4.25%, Mr Robertson said.

“Trend data shows conditions for employment are slowly easing, but the RBA still expects demand for labour to remain intact and the unemployment rate not to rise at all from here.”

Mr Robertson said his forecast is less optimistic with upcoming jobs data, including the next release on October 16, likely to be influential for the next move on cash rates.

Weaker USD likely but markets march on

Meanwhile the global economy remains as uncertain as ever, although not all uncertainty delivers bad outcomes, Mr Robertson said.

“Tariffs remain problematic but so far more extreme scenarios to the downside haven’t emerged, as initially feared. Stock markets have again set fresh record highs in a wide range of locations still looking through short-term impacts of tariffs and geopolitical tensions to the medium-term upswing promised by AI and other emerging technologies.

“Stocks may well be right to factor in this upside, but its implications for FX and bond markets appears less decisive.”

A weaker US Dollar ahead is likely as the Federal Reserve cuts rates despite rising US inflation: “This may also be challenging for bonds, but for now markets are marching on.”

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