TD Securities Shifts to Rate Hike Call on Stronger Q2 GDP

TD Securities has revised its expectations for the Reserve Bank of Australia (RBA) to raise the cash rate by 25 basis points to 4.60% at the September meeting. The change follows stronger-than-expected Q2 GDP and firm discretionary consumption.

The bank's Prashant Newnaha notes that growth is running slightly above trend, but the RBA has stated that growth needs to slow to get on top of inflation. Newnaha believes a further hike this year is possible but not their base case.

Annual growth is running a touch above trend, and implied q/q GDP growth to meet the Bank's Aug '26 MPS forecasts is 0.3% q/q in Q3 and Q4. S&P's Australia Composite PMI survey covering July and August points to growth improving in Q3 and likely exceeding the RBA's implied Q3 q/q GDP forecast.