ANZ Research discusses its latest macro forecasts for the Australian economy.

"The Australian economy will slow over 2026 and into 2027 under the combined influence of higher interest rates, a housing market slowdown and uncertainty associated with the Middle East conflict. The slowdown in growth that we expect over 2026 and into 2027 should give the RBA comfort that inflation will ultimately ease back toward target. The most recent monthly inflation data point to Q2 2026 trimmed mean inflation at 3.7% y/y, a little below the RBA's May forecast of 3.8% y/y. That and the softening in consumer spending over recent months and the drift higher in the unemployment rate are giving us more comfort that the current 4.35% will mark the peak in the cash rate," ANZ notes.

"Inflation remains a risk though, and further tightening in monetary policy is possible if price pressures prove more persistent than expected. The more likely outcome is that the soft outlook for demand, pressure on businesses' margins and a resolution to the Middle East conflict will keep the RBA on hold in 2026 before a very modest easing cycle over the second half of 2027," ANZ adds.