---
title: "Goldman Sachs sees a fifth Australian rate hike as Morgan Stanley says home prices fall 15%"
description: "Reserve Bank deputy governor Andrew Hauser put a fifth 2026 rate hike in play and Goldman Sachs changed sides. Morgan Stanley has already priced the outcome: a 10% Australian housing fall if the bank holds, 15% if it hikes, and no floor before late 2027."
publisher: "The Inference"
section: "Economy"
published: 2026-10-21T19:09:11.708Z
modified: 2026-10-21T19:09:11.708Z
canonical: https://theinference.org/article/goldman-sachs-sees-a-fifth-australian-rate-hike-as-morgan-stanley-says-home-prices-fall-15
language: en
keywords: "Reserve Bank Of Australia, Interest Rates, Housing, Goldman Sachs, Morgan Stanley, Australia"
---

# Goldman Sachs sees a fifth Australian rate hike as Morgan Stanley says home prices fall 15%

> Reserve Bank deputy governor Andrew Hauser put a fifth 2026 rate hike in play and Goldman Sachs changed sides. Morgan Stanley has already priced the outcome: a 10% Australian housing fall if the bank holds, 15% if it hikes, and no floor before late 2027.

## One board vote, two housing paths

Reserve Bank of Australia deputy governor Andrew Hauser [told a Citi conference in Sydney on Wednesday](https://www.msn.com/en-us/news/other/australian-central-banker-says-inflation-outlook-worse-unsure-about-november-rate-hike/ar-AA2fFUCg) that the inflation outlook is "materially worse" than the bank's August forecasts, naming the Middle East oil shock, the AI and technology boom and weak productivity as the pressures [1][4]. The board has already [lifted its cash rate four times this year, from 3.60% to 4.60%](https://www.rba.gov.au/statistics/cash-rate/) [2].

[Goldman Sachs](https://theinference.org/markets/companies/goldman-sachs) switched its call the same day and [now expects a fifth rise, to 4.85%, on November 3](https://investinglive.com/news/investinglive-asia-pacific-market-news-rba-s-hauser-puts-november-hike-in-play/); UBS expects one too [3][4]. Futures imply roughly a 40% chance of that, and Bloomberg-based pricing puts it at 51% [1][4].

*Chart: **Four hikes took Australia's cash rate to 4.60%; Goldman adds a fifth on November 3** Line chart of the RBA cash rate through 2026, rising from 3.60% in January to 4.60% in September, with a dashed November point at Goldman Sachs' forecast 4.85%.*

*RBA cash rate target at each 2026 decision, percent. The November point is Goldman Sachs' forecast for the November 3 meeting, not a decision. Sources: RBA interest rate decisions table; investingLive, October 21, 2026. [2][3]*

[Morgan Stanley](https://theinference.org/markets/companies/morgan-stanley) priced the damage. A team led by economist Chris Read [now expects national home values to fall 10–15% from their March peak](https://www.insurancebusinessmag.com/au/news/breaking-news/morgan-stanleys-gloomier-house-price-could-give-brokers-a-headache-594302.aspx), bottoming in the second half of 2027: the deepest nominal housing downturn in more than 40 years, and roughly double the 5–10% it forecast after May's budget [5][6]. If the bank holds, about 10% [5]. If it keeps tightening, toward 15% [5].

*Chart: **Morgan Stanley's floor matches the other banks' worst case** Bar chart of forecast peak-to-trough Australian house price falls: Westpac 7.3%, CommBank about 9%, Morgan Stanley 10% if the RBA holds and 15% if it hikes, AMP stress case 20%.*

*Forecast peak-to-trough declines in Australian national home values from the March 2026 peak, percent. Westpac and CommBank forecasts as reported September 28, 2026; Morgan Stanley client note October 21, 2026; AMP stress case assumes an oil shock and rising unemployment. All values are forecasts, not outcomes. [5][9]*

## The fall is a third done, and nothing says stop

Cotality, the property data firm formerly known as CoreLogic, [put September's fall at 1.1%, a sixth straight monthly decline](https://www.msn.com/en-au/money/economy/housing-downturn-forecast-to-run-up-to-15-per-cent/ar-AA2fFcd6), leaving national values 5.2% below the March peak [5][6]. The Australian Bureau of Statistics says the total value of Australian homes dropped $34.1 billion in the June quarter to $12.7 trillion, the first quarterly fall since 2022 [5]. None of the five bottom signals Morgan Stanley watches, from rate-cut pricing to auction clearances, has flashed for nine months [5].

## Lenders are covered; the insurers are not

The Reserve Bank's [October Financial Stability Review](https://www.rba.gov.au/publications/fsr/2026/oct/) says most borrowers hold positive equity and large savings buffers, and banks are well capitalized for a material downturn [7]. Its stress case, a uniform 20% price fall, tips only about 5% of mortgages into negative equity [5].

The tail risk sits one layer down, with lenders mortgage insurers, who pay the bank when a forced sale fails to clear a loan. That market, led by Helia and QBE LMI, has not faced a serious national downturn since the early 1990s [5].

Helia, the biggest, [posted a 25% fall in first-half net profit to $100.0 million](https://www.msn.com/en-au/money/economy/helia-group-posts-lower-half-year-profit-but-declares-interim-and-special-dividends/ar-AA29NYB2), with gross written premium down 44% to $61.6 million after losing Commonwealth Bank's new business [5][8]. Home insurers face the mirror image: rebuilding costs rose about 30% in the five years to March 2026 even as sale values fall [5].

## The shallow end has its own economists

[Westpac sees a 7.3% peak-to-trough fall and a 3% recovery in 2027](https://www.mpamag.com/au/news/general/westpac-cuts-house-price-forecast-tips-73-peak-to-trough-fall/591352); Commonwealth Bank sees about 9% [9]. Both lean on supply: only 1.2% of dwellings are listed for sale against a 20-year average of 1.8%, with little sign of forced selling [9]. On that reading, Morgan Stanley remains the outlier it was in May [6].

## What settles it

September-quarter inflation lands on October 28, with [core inflation seen near 3.5% against the bank's 2–3% target](https://www.msn.com/en-au/money/markets/rba-deputy-warns-inflation-outlook-materially-worse-ahead-of-november-meeting/ar-AA2fGxgR) [1][3]. The board decides at 2.30pm in Sydney on November 3 [3]. Helia's third-quarter update, the first hard read on arrears, follows within weeks [5]. Hauser calls the housing slowdown evidence that policy is working; Morgan Stanley calls it one-third of the deepest fall in four decades [1][6].

## Takeaway

The November 3 RBA vote now has a two-track housing forecast attached: Goldman Sachs and UBS expect a fifth hike to 4.85%, Morgan Stanley expects national home values to fall 10% if the bank holds and 15% if it hikes, and the RBA's own review says the banks are covered while the insurers may not be.

## Sources

1. [Reuters (via MSN), "Australian central banker says inflation outlook worse, unsure about November rate hike", 21 October 2026](https://www.msn.com/en-us/news/other/australian-central-banker-says-inflation-outlook-worse-unsure-about-november-rate-hike/ar-AA2fFUCg)
2. [Reserve Bank of Australia, Cash Rate Target: interest rate decisions table, accessed 21 October 2026](https://www.rba.gov.au/statistics/cash-rate/)
3. [investingLive, "investingLive Asia-Pacific market news: RBA's Hauser puts November hike in play", 21 October 2026](https://investinglive.com/news/investinglive-asia-pacific-market-news-rba-s-hauser-puts-november-hike-in-play/)
4. [ABC News (via MSN), "RBA deputy warns inflation outlook 'materially worse' ahead of November meeting", 21 October 2026](https://www.msn.com/en-au/money/markets/rba-deputy-warns-inflation-outlook-materially-worse-ahead-of-november-meeting/ar-AA2fGxgR)
5. [Insurance Business, "Morgan Stanley's gloomier house price could give brokers a headache", 21 October 2026](https://www.insurancebusinessmag.com/au/news/breaking-news/morgan-stanleys-gloomier-house-price-could-give-brokers-a-headache-594302.aspx)
6. [Australian Associated Press (via MSN), "Housing downturn forecast to run up to 15 per cent", 21 October 2026](https://www.msn.com/en-au/money/economy/housing-downturn-forecast-to-run-up-to-15-per-cent/ar-AA2fFcd6)
7. [Reserve Bank of Australia, In Brief: Financial Stability Review, October 2026](https://www.rba.gov.au/publications/fsr/2026/oct/)
8. [The Motley Fool Australia (via MSN), "Helia Group posts lower half-year profit but declares interim and special dividends", 31 July 2026](https://www.msn.com/en-au/money/economy/helia-group-posts-lower-half-year-profit-but-declares-interim-and-special-dividends/ar-AA29NYB2)
9. [Mortgage Professional America, "Westpac cuts house price forecast, tips 7.3% peak-to-trough fall", 28 September 2026](https://www.mpamag.com/au/news/general/westpac-cuts-house-price-forecast-tips-73-peak-to-trough-fall/591352)


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Goldman Sachs sees a fifth Australian rate hike as Morgan Stanley says home prices fall 15% — The Inference. Canonical: https://theinference.org/article/goldman-sachs-sees-a-fifth-australian-rate-hike-as-morgan-stanley-says-home-prices-fall-15