With its final interest rate decision for 2025, the Reserve Bank of Australia (RBA) has announced that the official cash rate is to remain on hold at 3.6 per cent[1]. As you’d expect, commentators have already started divining what future rate announcements might be for the coming year.
So should you be following their commentary closely?
Well, that depends on why you’re listening.
Are you listening just for entertainment, or are you thinking you’ll make financial decisions based on the various forecasts and projections of the day?
If it’s the latter, then some words of caution: projections change.
That’s why around this time each year we like to review a few of the earlier projections – also made by experts at the time – that didn’t come to pass. A few examples of the interest rate predictions that once glittered but didn’t quite deliver. They’re a good reminder that even the best economists and analysts can’t always pick what Santa – or the RBA – has in store.
Before we peek under the Christmas tree and unwrap some of the earlier offerings from the big four banks, let’s do a brief a recap of what actually happened with rates this year:
You may recall the first cut to the cash rate this calendar year was in February 2025, when the RBA had cut the cash rate to 4.10 per cent – its first rate cut decision since 2020.[2]
Then two more rate cuts followed – in May 2025, taking the cash rate to 3.85 per cent – and then in August 2025, where it arrived at 3.6 per cent (where, at the time of writing, it remains).
The Big Four Bundle
All the big four banks – Westpac, CBA, NAB, and ANZ – had bundled up their predictions of multiple rate cuts in 2025 to bring their projected cash rate to around 3.35 per cent or lower.[3] – Their projection was about as accurate as a jolly good guess but not quite on the money.
Westpac’s Gift
In August 2024, Westpac had projected a generous four rate cuts by the end of 2025 (incorrect), which they predicted would start in February 2025[4] (correct) and would take the cash rate to 3.35 per cent by the end of the year.[5] (Not so accurate.)
We now know that the RBA delivered only three modest trims this year to the current rate of 3.6 per cent (at December 2025).
… So Westpac’s gift was a neatly wrapped package perhaps, but one that didn’t quite reach their cash rate expectations.
To put it simply, forecasting rate changes and timings can be like forecasting the weather for an outdoor lunch. Even the best meteorologists with access to advanced models and satellite data can still get it wrong.
… That’s because expertise can help narrow the possibilities, but it can’t eliminate the inherent unpredictability.
Making forecasts about monetary policy is difficult and no one can repeatedly do it with any accuracy.
These examples don’t diminish the substantial expertise of the professionals who forecast them – rather, they highlight the challenge of forecasting in a world full of surprises.
So, instead, align your money with what’s important to you. And read any end-of-year financial forecasts for entertainment, not action.
For financial advice that aligns with your values, call me at Align Financial on (02) 9913 9995.
[1] Statement by the Monetary Policy Board: Monetary Policy Decision, Reserve Bank of Australia media release dated 9 December 2025, available online at: https://www.rba.gov.au/media-releases/2025/mr-25-33.html
[2] Reserve Bank of Australia Interest Rate decisions about the cash rate target, available on the RBA website: https://www.rba.gov.au/statistics/cash-rate/
[3] Farrington, William, Jul 2025, Commonwealth Bank, NAB, Westpac, ANZ still bullish on rate cuts despite RBA hold. Online article published on 16 July 2025, available at: https://www.mpamag.com/au/mortgage-industry/market-updates/commonwealth-bank-nab-westpac-anz-still-bullish-on-rate-cuts-despite-rba-hold/542659
[4] Ellis, Luci, August 2024. It will take more for the RBA to move: first rate cut later, a faster decline a risk. Online article published on the Westpac website on 7 August 2024, available online at: https://www.westpaciq.com.au/economics/2024/08/forecasts-note-7-august-2024
[5] Ellis, Luci, Luci’s call: Rate cuts seen later, but at a faster pace, article published on the Westpac website on 21 November 2024. https://www.westpac.com.au/news/making-news/2024/11/lucis-call-rate-cuts-seen-later-but-at-a-faster-pace/
