NAB boss says rates nearing peak ahead of Reserve Bank decision

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National Australia Bank boss Ross McEwan says there could be one more interest rate rise in the next three months but that rates are nearing the top of the cycle, with economic growth to continue slowing into the New Year.

Speaking on a NAB podcast before the Reserve Bank’s final rate decision of the year next week, McEwan said higher interest rates were having the intended effect of putting the brakes on the economy, and that they were likely nearing their peak.

NAB chief executive Ross McEwan said he expected Australian retail to slow.Credit: Simon Schluter

“With the move two weeks ago, I think we’re probably getting close to the top of the cycle and [have] done enough, but February will tell,” he said. “I think what we need to do is wait for the next probably four weeks, six weeks, and just see how Black Friday and Christmas trading goes.”

At its last meeting in November, the Reserve Bank raised the official cash rate by 25 basis points to 4.35 per cent after four months of leaving it unchanged.

With the latest monthly figures from the Australian Bureau of Statistics (ABS) this week showing inflation slowed to 4.9 per cent in October, the market consensus is for the Reserve Bank to keep rates on hold on Tuesday.

However, hawkish comments made by Reserve Bank governor Michele Bullock this week noting “households and businesses are actually in a pretty good position,” leave the prospect of a further rate hike on the cards.

On Wednesday, Commonwealth Bank boss Matt Comyn said it was “not unexpected” that higher rates and the cost of living would weigh heavily on consumers into the start of the New Year.

McEwan said Australian retail, and the economy more broadly, was slowing and that he expected a further slowdown in 2024 despite support from strong migration.

“[The economy] certainly is slowing down and that’s been the whole intent of moving interest rates up,” he said. “We do suspect that retail will slow. Things have been covered over by very strong migration to Australia … but the underlying trends are pretty sluggish.”

ABS data for October showed retail trade fell 0.2 per cent from the previous month, although Black Friday sales are expected to provide a boost in November.

Comyn said while there had been a lot of focus on Black Friday, the key factors to watch ahead of the February meeting would be the December inflation data and retail trade in the weeks to follow. “It’s as much I think about what the trading is like after [Black Friday],” he said.

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