UBS expects the Reserve Bank of Australia to stay restrictive through much of 2027, with rate cuts unlikely before late 2027 or 2028. George Tharenou, the bank’s chief economist for Australasia, said another RBA hike is more likely than a cut if the central bank moves in the near term.
The view is more hawkish than market pricing, which has shifted toward RBA cuts within months. UBS sees the RBA’s central case as an extended hold, with the February meeting flagged as a possible hike if inflation surprises to the upside.
Investment boom feeds inflation first
UBS says the AI investment boom adds to Australia’s inflation before it delivers any productivity gains. The RBA estimates data centre investment rose about tenfold over three years.
The bank forecasts Australian economic growth of 1.4 percent in 2027.
Doubts over household spending
Tharenou questioned official household spending growth of 6 to 7 percent a year. He noted that listed retailer trading updates have been close to flat.
UBS’s upbeat global outlook, with growth of 3.5 percent forecast for 2027, depends on a Middle East resolution that brings oil prices down. By our market data, the Australian dollar was at $0.6802 as of 00:20 GMT, its lowest in 31 days.
Related: Bank Negara holds rate at 2.75%, Commerzbank sees hike in Q1 2027 · DBS sees Bank Negara holding Malaysia's rate at 2.75% in November
Source: Reserve Bank of Australia · UBS | Data: Swissquote
