The Reserve Bank has just announced a 25 basis point reduction in the official cash rate from 4.1% to 3.85%.
This move was widely expected and can be expected to flow into reductions in variable rate mortgages and other business borrowing rates in coming weeks. I believe this was the correct decision by the RBA.
It will be welcomed by both consumers and businesses feeling the continuing pressures of elevated costs.
The RBA’s forecasts incorporate some anticipated slight negative effects from tariffs and associated uncertainties. While GDP growth is expected to increase, it is now expected to strengthen a little less to 2.2% in 2025 compared to 2.4% previously.
As a consequence, the unemployment rate is very slightly higher in the forecasts (4.3% compared to 4.2% previously) and underlying inflation somewhat lower – around target at 2.6%.
The Bank cautions that the final scope of tariffs remains uncertain, but policy remains well placed (i.e. interest rates can be cut further) if developments suggest increased risk that unemployment may rise more than expected.
Chief Economist
Interest Rates
Chief Economist
Ivan joined CreditorWatch as Chief Economist in October 2024. He is a highly experienced chief economist and keynote speaker on the economy and financial markets.
Most recently, Ivan was Chief Economist, Corporate & Institutional Banking for National Australia Bank, but has also been Chief Economist for Qantas and Chief Economist (Australia) for ANZ and Deutsche Bank. Ivan has also consulted to SEEK, IATA and Virgin Australia.
Ivan holds a Bachelor of Economics with Honours from the University of Tasmania and commenced his career at the Reserve Bank of Australia.
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