RBA expected to cut three times

ANZ Research has updated its interest-rate forecast on the back on tariff announcements from the United States, and now expects the Reserve Bank of Australia (RBA) to cut three more times in 2025.

Given the likely impact of the tariffs on global growth, as well as those already evident on markets, ANZ Research expects the RBA to lower the official cash rate in May, July and August, by 25 basis points at each meeting. That would see the cash rate at 3.35 per cent come August.

At a macroeconomic level, the US does not buy particularly large amounts of Australian exports, but there may be sectoral impacts from tariffs. The bigger risks for the Australian economy centre around the implications for global growth and both domestic consumer and business confidence.

The tariff announcements are still being digested, and the coming week(s) will bring greater clarity on scope for negotiation and potential responses by US trading partners.

Sentiment

On the information at hand, the market reaction and past RBA responses to global shocks, more RBA easing now seems more likely than not. Indeed, ANZ Research would not rule out a 50 basis point cut in May, if sentiment sours and the global growth outlook deteriorates sufficiently.

While the RBA does not target market sentiment, conditions that give rise to negative market sentiment often see the RBA ease. Rate cuts from the RBA would offset much of the risk that a deterioration in confidence flows through to spending.

As a result, ANZ Research’s broader gross domestic product growth, unemployment and inflation forecasts will be little impacted. Rather, the cash rate (and potentially the Australian dollar) will make the adjustment to limit the impact on the real economy.

For commodity exporters like Australia, it is typically the price of exports that adjusts to global growth shocks more than volume. That means nominal GDP growth will be softer even if real GDP growth is little changed.

That the economy is entering this period with growth in the fourth quarter 2024 around trend, near full-employment and moderating inflation is helpful.

The global developments have overshadowed domestic ones. The first meeting of the RBA’s new Monetary Policy Board this week passed with no change to the cash rate. The most significant changes in the post-meeting statement were around the global economy.

The board noted ahead of the US announcements that “recent announcements from the United States on tariffs are having an impact on confidence globally and this would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures”. RBA Governor Michele Bullock’s speech on April 10 will be watched closely.

Adam Boyton is Head of Australian Economics at ANZ

This is an edited version of the ANZ Research note “Australian Macro Weekly: change in RBA call, more easing:, published April 4, 2025.