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Australia isn't too far away from seeing interest rates drop by an entire percentage point, if the Organisation for Economic Co-operation and Development (OECD) is to be believed.
The major financial body, based in Paris and headed by former Australian finance minister Mathias Cormann, recently released its outlook report for Australia, in which it said it expects the cash rate to drop to 3.35 per cent by early 2026.
"An easing of monetary policy is warranted over the next year given ongoing disinflation and below-potential growth," it wrote.
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"Indeed, with inflation falling and nominal policy rates unchanged since November 2023, real interest rates have been rising," it added.
"But with headline and core inflation projected to be back below target by early 2025, a gradual easing of policy is expected to begin next year and to continue into early 2026, taking the policy rate down to 3.35 per cent."
That's largely in line with most of Australia's major banks, which, for the most part, are predicting four rate cuts in 2025, although ANZ is now only forecasting two.
However, the OECD cautioned that inflation could scupper chances of easing interest rates if it remains higher than expected for longer.
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It also warned that, while growth in the economy is expected to pick up to 1.9 per cent next year and 2.5 per cent in 2026 (it was just 0.8 per cent in the 12 months to September), a drastic crackdown on immigration could hinder that.
Both the federal government and opposition have promised to limit the number of migrants coming to Australia, particularly in an attempt to free up housing.
However, the OECD argued that could have unintended economic consequences.
"An abrupt slowing of immigration would hinder consumption growth," it wrote.
"Policymakers should beware, in seeking to curb immigration to ease pressures on housing costs, of worsening labour shortages, including in house-building," it added.
