All four of Australia's Big Four banks are now in alignment: They're all expecting interest rates to rise later this year.

Westpac is the latest player to shift its outlook, abandoning its call from last month that interest rates would remain on hold through the end of 2026. The bank had been the lone holdout among the major banks, previously forecasting that the Reserve Bank of Australia's (RBA) next move would be a rate cut midway through 2027

"A rate hike in November moves back into the base case," Westpac Group's Chief Economist Luci Ellis said on Tuesday. The major now expects the RBA to increase rates by 25 basis points at the November meeting.

"The main reasons for the shift are the growing evidence of a more resilient household sector, and a larger-than-expected impetus from the spillovers from the data centre boom," Ellis continued. "National accounts and internal data have pointed to stronger household incomes in Q2 and onwards, which means spending will be more resilient over the near term even with sentiment stuck at historically weak levels.

"Although the housing market is looking weaker than our previously published forecasts, its impact on consumer spending is more than offset by the wider boost coming from a globally-driven surge in tech-related spending," the economist added. "An unprecedented pipeline of investment in data centres and associated renewable electricity generation and distribution is expected to drive business investment and so GDP growth, but also limit the pace of disinflation."

The RBA has raised the official cash rate (OCR) three times so far in 2026, taking it to its current level of 4.35%.

At the most recent meeting on monetary policy, in August, RBA Governor Michele Bullock said the bank would consider raising interest rates again, "if that is what is required to bring inflation down in a timely way." RBA Deputy Governor Andrew Hauser reiterated Bullock's warning later in the month while speaking at an event in Brisbane, saying that the conflict in the Middle East, investments in artificial intelligence and weak productivity growth in Australia are all potential sources of further inflationary pressure.

ANZ, National Australia Bank (NAB) and Commonwealth Bank of Australia (CBA) were all quick to price in further interest rate hikes later in the year. All three forecasted a 25-basis-point increase, but differ on timing: NAB anticipates a September hike, while CBA and ANZ are forecasting an increase in November.

By the last week of August, futures were pricing in a 40% chance of a rate hike in September, rising to around 97% for November if the central bank leaves rates unchanged at its September meeting. By the first week of September, markets had increased its future probability of a rate rise at the September meeting to 54%.

"We're already experiencing a demand shock off the back of the federal government's tax changes to property," Kingsley said. "So this is going to be another nail in the coffin for demand. We are going to see further lessening of demand and higher supply. Now that's great news for people who can afford to actually buy, because property prices are going to come down. But for a lot of people, it also is going to impact their ability to borrow. So overall, it's a net negative."

The RBA's next meeting on monetary policy is scheduled for the 28 and 29 of September.