Australia’s latest inflation figures came in below expectations, easing pressure on the Reserve Bank ahead of its next rates decision. NAB Chief Economist Sally Auld discusses what the data means for interest rates and the inflation outlook.
Coming in for landing in a heavy cross wind – The Forward View Australia - NAB
Updated on 25 July 2025
21 July 2025
Economy and Markets Interest Rates
Economic outlook signals changing conditions
In the July edition of The Forward View Australia, NAB Economics reaffirms its outlook for the Australian economy, maintaining its forecasts despite a cautious Reserve Bank and a surprise rise in the unemployment rate.
Key notes:
- Activity, labour market and inflation forecasts are unchanged this month.
- Growth is expected to return to trend over the next 18 months, with unemployment remaining low and inflation settling at 2.5%.
- A more cautious RBA means NAB now see cuts in August, November and February, for a terminal rate of 3.1%.
- Global factors remain a risk to the activity and labour market outlook, though there is little evidence of an impact so far in domestic data.
“We expect another year of below trend growth, but for GDP growth to accelerate to around trend over 2026. We expect the unemployment rate to drift up modestly, peaking at 4.4% in late 2025. Despite the small upside surprise to inflation in the quarter, we still expect inflation to settle around 2.5% in H2 2025.
However, despite the elevated global risks to activity (and the likelihood that additional US tariffs would be disinflationary for Australia) the RBA continues to focus on the domestic data flow. We see the RBA remaining cautious, cutting with a quarterly cadence, taking the cash rate to 3.1% by early 2026,” the report says.
For deeper insights and data, explore the July 2025 edition of The Forward View Australia.
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