Australia’s interest rate outlook has shifted again, with Ray White Group Chief Economist Nerida Conisbee noting that the latest data presents a more complicated picture for the Reserve Bank than earlier in the year.
She says the labour market remains firmer than expected, even as other parts of the economy show signs of slowing.
October’s unemployment figure falling back to 4.3 per cent confirms that hiring conditions have not eased in a meaningful way.
She explains that while this is positive for workers, it weakens the case for a near-term reduction in interest rates, as a firm labour market makes it harder to argue that inflation risks have subsided.
At the same time, she points out that several sectors are now clearly losing momentum. Ms Conisbee highlights subdued retail spending, weaker readings in business surveys, and emerging pressure across small enterprises and some segments of the housing market.
These pockets of weakness suggest the economy is cooling, though not in a consistent pattern.
According to Ms Conisbee, the construction sector is offering the strongest indication of what may come next, noting that activity is slowing rapidly, with fewer new project starts and easing wage and materials cost pressures.
She also highlights contrasting consumer sentiment readings: the ANZ–Roy Morgan index shows households are still feeling the strain of higher borrowing costs, while Westpac’s latest figures show an improvement in confidence among some groups. According to her, any recovery in sentiment remains cautious.
The mixed data has led to differing views on the path ahead and Ms Conisbee says some analysts now expect the first rate cut to occur in late 2026, while others believe the slowing construction sector and softer pockets of demand could support earlier easing once inflation is clearly tracking lower.
She says the path to lower interest rates remains open but data-dependent, with the firm labour market delaying the timeline even as the slowdown in construction suggests the broader economy is already easing inflationary pressure.
