The boss of one of Australia’s biggest banks said the case for cutting interest rates in August was stronger following a drop in inflation. Westpac CEO Anthony Miller said markets had now priced in roughly a 90 per cent chance of a cut at the Reserve Bank of Australia’s (RBA) meeting in just a few weeks' time.

Headline inflation eased to 2.1 per cent from 2.4 per cent in the June quarter, the latest Australian Bureau of Statistics figures revealed. Underlying inflation, the central bank’s preferred measure, slowed to 2.7 per cent from 2.9 per cent.

Miller said there appeared to be more evidence for cutting interest rates and noted the underlying inflation rate, known as the trimmed mean, was the figure we should “all fixate on”.

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“The fact that it wasn’t up probably is another data point that reinforces it is open to the Reserve Bank to cut rates,” he told a Trans-Tasman Business Circle event.

However, Miller acknowledged a cut wasn’t a 100 per cent done deal, considering the RBA’s shock decision to hold interest rates at 3.85 per cent this month defied market expectations.

“It feels like there’s even more evidence now that they should [cut rates], but I can’t help but think that only four weeks ago, everyone was absolutely clear that there was a rate cut coming, and it didn’t,” he said.

“I think we’re lucky to have a Reserve Bank and a governor with that independence and that confidence to look after the country’s long-term interests.”

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Miller noted the number of the bank’s home loan customers who were 90 days behind on their repayments had continued to fall.

Westpac is the only one of the Big Four banks that automatically drops repayments for customers paying the minimum amount following rate cuts.

CBA, NAB and ANZ customers have to request the change, with the three major banks revealing just one in 10 borrowers had lowered their repayments after the May cut.

Westpac expects four more interest rate cuts

Westpac chief economist Luci Ellis said the RBA now had confirmation that inflation was on track to return to the midpoint of its 2 to 3 per cent target range and stay there.

“We expect the RBA to cut the cash rate by 25 basis points at its August meeting in a couple of weeks to 3.6 per cent,” she said.