Westpac Tips August RBA Rate Hike as Inflation Stays Hot

Australia's cash rate could rise again as early as August, with Westpac warning borrowers to brace for further repayment pressure.

Westpac has put Australia's borrowers on notice: interest rates may not have peaked yet. The major bank's chief economist has flagged that the Reserve Bank of Australia could lift the official cash rate again as early as August — a move that would add further pressure to already-stretched household budgets across the country.

The RBA currently holds the cash rate at 4.35%, following three rate increases already in 2026. It held at its June meeting, but the language coming out of that decision was anything but reassuring for borrowers hoping for relief soon.

What Westpac Is Forecasting

Westpac Chief Economist Luci Ellis has been direct about where the bank sees things heading. In its latest outlook, Ellis pointed to the RBA's own post-meeting language as a clear signal that another hike remains firmly on the table.

"The post-meeting communication added language stating that the monetary policy board stood ready to hike if needed," Ellis said. "This drafting decision is unusual for an RBA statement, and was a stronger steer than previously. It suggests that the monetary policy board wanted to hose down recent speculation that they are done hiking rates. Its assessment of the real economy in both the post-meeting communication and the minutes was sanguine, and it is clearly more worried about upside risks to inflation than downside risks."

As Australian Broker reports, Westpac has pencilled in an August rate hike and has not ruled out a second increase in September. The bank believes a follow-up September move remains a likely outcome, though Ellis acknowledged that conviction has eased somewhat. Rate cuts, in Westpac's view, are now unlikely to begin until 2027 — an earlier timeline than the previous estimate of early 2028.

That is a sobering timeline for anyone who was counting on relief before year's end.

What the Inflation Data Is Telling Us

The RBA's reluctance to ease up is grounded in where inflation sits. Headline CPI rose 4% in the year to May 2026 — down slightly from 4.2% the month before, but still double the top of the RBA's 2–3% target band. Trimmed mean inflation, which strips out volatile price movements and is considered a more reliable guide to underlying price pressures, actually ticked up to 3.6% in the 12 months to May, from 3.4% in April.

Both figures remain above the RBA's target, which is why RBA Governor Michele Bullock emphasised after the June meeting that holding rates "does not rule out further tightening in monetary policy if that is what is required to get inflation down."

The next critical data point is the quarterly CPI print, due 29 July. That number — landing just two weeks before the RBA's 10–11 August meeting — will play an outsized role in determining whether Westpac's forecast becomes reality. If the figure comes in hotter than expected, an August move becomes almost unavoidable.

Where the Big Four Banks Stand

It is worth noting that Australia's major banks are not aligned on what happens next. Commonwealth Bank of Australia (CBA) and ANZ are both anticipating a hold at the August meeting. National Australia Bank (NAB) also expects a hold, but believes the RBA's next move will eventually be a decrease — even if the timing is unclear. Westpac alone among the major four is calling an August hike.

That split matters for borrowers trying to make decisions about fixed versus variable rates right now. If Westpac is right, variable rate borrowers face another increase in monthly repayments within weeks. If CBA and ANZ are right, rates hold — but still at 4.35%, a level that remains historically elevated for anyone who entered the market during the near-zero rate environment of 2021 and 2022.

Geopolitical factors, including tensions in the Middle East and recent federal budget changes, are also part of the RBA's risk assessment and add another layer of uncertainty to the outlook.

What Borrowers Should Do Right Now

Whether or not August brings a rate rise, the message from the banking sector is consistent: rates are not coming down any time soon. Borrowers who have been banking on imminent relief need to update their assumptions and act accordingly.

For those on variable rates, now is a sensible time to check your current rate against what else is available in the market. Lenders are still competing for business, and refinancing to a sharper rate could save thousands — regardless of what the RBA does in August. Use our refinance savings calculator to see what the numbers look like for your loan.

For those weighing fixed versus variable, the uncertainty around August makes this a genuinely difficult call. Fixing locks in certainty but at rates that already price in significant tightening risk. Our repayment calculator can help you model different rate scenarios so you understand your exposure before committing.

If you are not sure where you stand on rate competitiveness, comparing current offers across lenders through our home loan comparison tool is a practical first step. The 29 July CPI print is now the number every Australian mortgage holder should have in their calendar.