May now firms for rate cut: Boyton

The Reserve Bank of Australia (RBA) is now unlikely to cut the official cash rate until May, according to ANZ’s Head of Australian Economics – with Australia’s resiliency to current rate levels playing a part.

In November, ANZ Research pushed its expectations for a rate cut out to May, from a previous mark of February, citing a pickup in consumer confidence and business conditions that have remained around long-run average levels. It also lowered the number of cuts it expects in 2025 to two, instead of three.

Speaking on the 5 in 5 with ANZ podcast, Adam Boyton said pockets of strength in Australia’s economy showed it was weathering the current level of rates – which have been at 4.35 per cent for more than 12 months – better than previously expected.

“To be clear, you wouldn't say the Australian economy is strong,” he said. “But it certainly has proven probably a bit more resilient to higher interest rates than we would have thought, say, six months ago.

Boyton said signs of improving activity over the past few months had been clear.

“Employment growth has been stronger than expected,” he said. “Business conditions remain around long run average levels. And we're starting to see, on the consumer side, consumer confidence picking up in the wake of the stage-three tax cuts.”

Australia’s rate position relative to its international peers, according to Boyton, explained why the economy was seeing fewer cuts then elsewhere.

“The cash rate in Australia at 4.35 never got as high as it did in places like the United States, Canada or New Zealand,” he said.