ANZ has aligned with other major Australian banks in forecasting further tightening from the Reserve Bank of Australia, anticipating two 25 basis-point increases to the cash rate at the March 16-17 meeting and again in May. Those moves would bring the policy rate to about 4.35%, according to the bank's economists.
Analysts at ANZ point to ongoing inflationary pressures and a tight labour market as the central drivers behind the projected increases. The bank highlighted recent consumer price data that it interprets as showing demand-driven inflation, and it stressed that the broader economic backdrop remains relatively strong.
ANZ noted that Australia's gross domestic product expanded by 2.6% year-on-year through the fourth quarter of 2025, a pace the RBA regards as above potential. That starting point for the economy is one reason the bank expects policymakers to continue normalising rates until policy reaches a level that can be judged sufficiently restrictive.
The bank also flagged the impact of the Middle East conflict on domestic inflation. "The clearest and most immediate impact of the Middle East conflict on Australia is higher inflation," ANZ economists wrote, adding that rising energy costs would erode household disposable income and could weigh on demand over time.
At the same time, ANZ pointed out that Australia’s position as a net energy exporter may blunt some of the effects of higher global energy prices. Elevated liquefied natural gas prices, the bank said, could improve the country's terms of trade and therefore partially offset the direct hit to households from higher energy costs.
While ANZ expects the RBA to raise rates in March and May, the bank also signalled that policymakers are likely to pause once the cash rate reaches around 4.35%. That pause would be intended to allow the RBA to assess whether monetary settings have become sufficiently restrictive and to evaluate the economic effects of ongoing global geopolitical developments.
Westpac has reached a similar conclusion on the likely timing of rate increases, also forecasting moves in March and May.
Contextual note - The projection from ANZ rests on a combination of above-potential GDP growth, signs of demand-driven inflation in recent price data and a tight labour market. Energy price dynamics and trade terms are highlighted as offsetting factors but not as reasons to avoid further tightening in the near term.