Unemployment data strengthens the case for a pause, but analysts warn hikes may not be over
Australia's central bank is widely expected to leave the cash rate unchanged at its June meeting, following a rise in unemployment and signals from the Reserve Bank of Australia's (RBA) own board minutes.
The April unemployment rate climbed to 4.5% — the highest seasonally adjusted figure since November 2021, according to official data released on Thursday. The reading has reinforced expectations of a pause after three consecutive cash rate increases.
The central bank's board minutes for this month's monetary policy meeting, published earlier this week, noted that the most recent hike to 4.35% would provide the board with "space to see how the conflict in the Middle East develops and Australian households and businesses respond".
"The RBA's May Board minutes were already pointing towards a likely pause in June to give the Board time to assess the impact of the war in Iran and the last three cash rate hikes," said Sally Tindall (pictured right), data insights director at Canstar.com.au. "Today's unemployment figures give it another reason to do just that.
"While one month of data doesn't make a trend, the jump in unemployment suggests higher interest rates could now be starting to bite."
All four major banks now expect a hold
NAB revised its cash rate forecast following the unemployment release, shifting its expectation for a further increase from June to August. As a result, all four major banks — CBA, ANZ, NAB and Westpac — now anticipate the RBA will keep the cash rate on hold at its 15–16 June meeting.
However, CBA and ANZ alone expect the current cycle to have peaked, while NAB and Westpac continue to forecast at least one additional hike.
Should the RBA raise rates by a further 25 basis points in August, a borrower with a $600,000 mortgage and 25 years remaining would face an additional $92 per month in repayments. Across four hikes — in February, March, May and August — the cumulative monthly increase would total $364.
| Impact of four 0.25 rate hikes on monthly repayments | ||
|---|---|---|
| Debt owing | August | Total increase |
| $600,000 | +$92 | +$364 |
| $800,000 | +$122 | +$485 |
| $1 million | +$153 | +$606 |
| Source: Canstar.com.au. Based on an owner-occupier paying principal and interest with 25 yrs remaining in Feb 2026 on the RBA average variable rate. | ||
"A pause in June will offer a much-needed breather, however, borrowers shouldn't mistake it for a peak," Tindall said.
"Westpac and NAB still expect further hikes, while CBA and ANZ are expecting this level of pressure to remain for the foreseeable future. In short, the cost-of-living crisis isn't going anywhere.
Switching could yield significant savings
Research from Canstar shows that an owner-occupier who took out a mortgage five years ago without subsequently renegotiating their loan could now be on a variable rate of 7.01%.
Switching to a competitive rate of 5.99% could save a borrower with a $600,000 loan more than $11,000 over two years, even after accounting for approximately $1,150 in switching costs.
"While a hold in June is by no means guaranteed, this potential reprieve is a window to shop around and shore up your budget," Tindall said. "If you are now sitting on a rate starting with a '7', you're essentially paying a big fat loyalty tax to your bank, especially as an owner-occupier.
"Canstar research shows borrowers who haven't reviewed their loan in years could potentially save more than $11,000 over two years simply by switching from an average variable rate to one of the more competitive offers currently on the market.
"Banks are still fiercely competing for quality borrowers. Even after this latest hike, there will still be around 40 lenders with at least one variable rate at 5.99% or below."
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