Big Four Split on Rate Path as Jobs Data Sends Mixed Signals

May's unemployment fall to 4.4% and a spending rebound have left Australia's biggest banks sharply divided on whether the RBA will hike or hold in August.

Australia's labour market sent a contradictory set of signals in May, and the country's four largest banks have drawn very different conclusions about what comes next for borrowers.

The Australian Bureau of Statistics (ABS) reported on 26 June that the seasonally adjusted unemployment rate fell 0.1 percentage points to 4.4 per cent in May. Employment rose by 40,300 people to reach 14,738,800, with full-time positions up 5,200 to 10,140,800 and part-time roles climbing 35,200 to 4,598,000.

Sean Crick, ABS head of labour statistics, explained that the improvement was partly a clearing of a backlog of people waiting to start jobs. "The backlog of people waiting to start a job has eased in May, contributing to the 40,000 rise in employment and 18,000 fall in unemployed persons," Crick said. He also flagged that trend employment and hours worked each rose by just 0.1 per cent in May — a sign that the underlying momentum in the labour market is measured rather than accelerating.

The jobs data arrived alongside a sharp rebound in household spending. The ABS reported that consumer spending in May rose 1.3 per cent in current prices, seasonally adjusted — 5.5 per cent higher than a year earlier. That follows a 1.1 per cent fall in April and a 1.7 per cent rise in March. ABS head of business statistics Tom Lay said the May rebound was broad-based, noting that it "largely reversed what was seen in April, reflecting a lift across all nine spending categories."

Together, lower unemployment and firmer household demand have complicated the picture for borrowers trying to work out where interest rates are headed.

Where the Big Four Stand on Future Rate Hikes

[The Adviser](https://www.theadviser.com.au/borrower/48604-jobless-rate-eases-spending-jumps-complicating-rate-path) reports that all four major banks have now updated their rate forecasts in response to the data — and they don't agree.

**ANZ** took the most relaxed view, arguing the jobs figures sat comfortably within the Reserve Bank of Australia's existing assessment of conditions, which it describes as "a little tight." ANZ said conditions appear "broadly balanced, with signs of ongoing easing," and expects unemployment to "drift higher, reaching a peak of around 4.8 per cent in late 2027." On rates, ANZ maintained its view "that the cash rate will remain on hold at the August meeting."

**Westpac** is considerably more hawkish. While acknowledging some noise in recent data, the bank said there is "genuine weakness forming underneath" — but also sees the combined effect of Middle East conflict and recent rate rises still working through the economy. Westpac has retained its forecast of two more cash rate hikes in August and September, and projects the jobless rate will hit "a quarter-average of 5 per cent in early 2027."

**Commonwealth Bank of Australia (CBA)** sits somewhere in the middle. Its economists noted that at 4.4 per cent, unemployment "remains a little tight and below our (and the RBA's) estimate" of full employment, but acknowledged the rate is "creeping higher and is well above the RBA's most recent forecast update which had the unemployment rate averaging 4.2 per cent in Q2 2026." On spending, CBA warned that the May result highlights the risk that household spending may slow "less than we expect, supported by healthy aggregate financial buffers," which "if sustained could delay the easing of inflation expected and make the RBA uncomfortable."

**National Australia Bank (NAB)** took the most dovish stance among the four. "Even after the data, unemployment is tracking above that forecast, which plays to the view the RBA will not be pushed by the data to tighten further," it said — adding that slightly higher unemployment was actually "welcome rather than a cause for concern because the RBA still considers labour market conditions a little tight."

What This Means for Borrowers

The honest reality is that nobody outside the RBA board room knows what happens next — and right now, even the country's biggest economic teams are split. What we can say clearly is that the risk of further rate rises has not gone away. Westpac's base case of two more hikes would add further pressure to household budgets that are already stretched.

If you are on a variable rate and have not stress-tested your budget against another 0.5 percentage points of increases, now is the time to do it. The [repayment calculator](/calculators/repayment) can help you model different rate scenarios so you know exactly where you stand before the August RBA meeting.

For borrowers who are close to their repayment limits, this environment also makes it worth reviewing what you are actually paying. Many lenders have moved rates at different speeds over the past year, and there is often a meaningful gap between what existing customers pay and what new borrowers can access. The [refinance savings calculator](/calculators/refinance-savings) can give you a sense of whether switching is worth pursuing. Checking your [borrowing power](/calculators/borrowing-power) is a useful first step before approaching any lender.

For first home buyers deciding whether to act now or wait, the current uncertainty cuts both ways. If Westpac is right and rates rise further, your borrowing capacity shrinks. If ANZ is right and the RBA holds, today's conditions may persist for a while. The best approach in that environment is to get your finances in shape — pre-approval sorted, deposit confirmed, budget stress-tested — so you can move quickly if conditions shift in your favour.

Watch the August RBA meeting closely. It will be the first real test of whether the RBA sides with those who see more tightening ahead or those who see the case for a pause. In the meantime, [compare today's home loan rates](/home-loans/cheapest) to see how current offers stack up.