The RBA Is Not Likely To Cut Rates Until 2025


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Last updated: May 2nd, 2024

interest rate news australia

Last updated: May 2nd, 2024

Reading Time: 9 minutes

Mindful of global inflationary trends, the RBA kept the official cash rate at 4.35% during its March meeting. Mortgage holders were given little insight into the future as the bank said it wasn’t “ruling anything in or out”.

A discouraging inflation print for the March 2024 quarter means monetary easing may be delayed. Yet the widely held view remains that the RBA will start cutting Australia’s interest rates in late 2024.

Most major banks think cuts before November 2024 are unlikely.

Key Takeaways:
The RBA’s stance is more neutral but it’s in no hurry to cut rates until data is clear on inflation easing.
Most major banks are forecasting cuts starting in November 2024, with about three cuts by mid-to-late 2025.
Annual headline inflation is at 3.6%, with March’s monthly indicator data showing a 3.5% increase, after being unchanged for three consecutive months.
GDP growth remains weak, and the labour market is tight, although unemployment will likely rise and productivity will improve.

Economists Embrace Higher-For-Longer Reality.

CBA Chief Economist Stephen Halmarick said pointed out that despite challenges, including geopolitical risks and the US presidential election, the Australian economy looked in good shape for 2024.

Halmarick said the CBA thinks inflation will ease sooner than the RBA’s current forecast and reach 3% by the end of 2024.

Above: the RBA is prepared to pump brakes on rate cuts to ensure the inflation falls into the 2%-3% target range.

The bank had predicted easing would start in September, but in April, its head of Australian economics, Gareth Aird, said Q1 inflation data and a lower-than-anticipated unemployment rate had changed the outlook.

“We now see a more elongated and conservative easing cycle than previously expected. Our base case sees the cash rate gradually cut from November 2024 to reach 3.10% at end-2025 (a level we believe is just above neutral)”, he said.


  • HSBC chief economist Paul Bloxham believes Australia won’t see any rate cuts this year.
  • AMP’s Chief economist Dr Shane Oliver said the RBA probably considered the need for a rate hike at its May meeting — but described the chance of another hike as “high risk” but unlikely.

Speaking with AFR, Bloxham warned of the impact of weak productivity growth, house prices and government spending.

“Although the RBA is patiently seeking to bring inflation down gradually, so as to maintain as close to full employment as possible, fiscal policymakers may not be so patient given the electoral cycle,” Bloxham said.

Government Is Under Pressure To Cut Public Spending.

The 2024 Federal Budget, due to be delivered on Tuesday, 14 May, has a significant potential to enhance productivity or add to inflationary demand.

Westpac’s Luci Ellis said in April that while the RBA would watch labour market developments closely, weaker employment wasn’t its primary tool for achieving disinflation — and labour costs look to be slowing.

“Accordingly, we assess that the RBA will keep rates steady at its upcoming meeting. It will probably continue to be cautious about services inflation and domestic price pressures more broadly for a few months yet.” — Luci Ellis, Chief Economist Westpac Group

Prominent forecasts for the central bank’s cash rate include:

Q2 2024Q4 2024Q2 2025Q4 2025

The RBA Continues To Be Vague On Rate Cuts.

In late 2023, Reserve Bank Governor Michele Bullock characterised Australia’s inflation as a “homegrown” problem, pointing to continued household spending on services like going to the hairdresser, dining out, and recreational activities.

Local demand is slowing, but Bullock said homegrown inflation was stickier than supply-side issues and could take time (~2 years) to stabilise.

In her statement following the RBA’s decision to hold rates at 4.35% in March 2024, Governor Bullock said inflation expectations remained consistent with the inflation target, and that higher rates were bringing supply and demand back down to a sustainable balance.

Of course, the Governor’s language about the likelihood of further rate hikes is vague. It depends on future economic data and how risks evolve.

(Related: Will Australia Go Into A Recession In 2024?)

Bullock said the RBA would, “..continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market.”

What Is The RBA’s Next Move?

Based on market-determined prices in the ‘ASX 30 Day Interbank Cash Rate Futures’, the ASX publishes an RBA Rate Indicator that calculates the percentage probability of a change in the cash rate.

As of May 1, 2024, trading of cash rate futures contracts indicated a 5% expectation of an interest rate increase to 4.60% at the next Reserve Bank board meeting (that is, a 95% expectation of no change).

(Related: Why Is Living In Australia So Expensive?)

Key Economic Indicators Influencing Australia’s Cash Rate.

What does the current economic data tell us about how interest rates might track?

1. CPI Inflation.

Keeping inflation in the 2-3% range is the RBA’s primary goal.

Did You Know?

Cash rate increases are designed to stifle inflation by making spending less attractive and, therefore, reducing the demand that leads to higher prices. However, it’s a careful balancing act to do so without depressing the economy.

The most current data from the ABS shows that:

  • Annual CPI inflation is 3.6% (% change from March 2023 to March 2024).
  • CPI inflation decreased from a 6.0% annual rise in the June 2023 quarter,  5.4% in the September quarter, and 4.1% in the December ’23 quarter
  • The monthly indicator data for March 2024 was higher than in January and February, with a 3.5% year-over-year change in prices.

Pockets of high inflation persist, especially for housing, rents, insurance, education, and health, which all rose in the 12 months to March 2024.

Rents and electricity would have seen even higher increases if it weren’t for government assistance measures.

Did You Know?

The ABS says without Energy Bill Relief Fund rebates, electricity prices would have increased by 17% since July 2023.

Above: Australian rent prices are rising at the fastest rate since the GFC, hampering the Reserve Bank’s efforts to tame inflation.

Insurance premiums saw the largest ever annual price increase in 23 years.


Inflation tends to lag other economic indicators, so it will take time to understand the flow-on effects of higher rates.

The next important gauge in 2024 will be the June 2024 quarter CPI figures due to be released by the ABS on July 31.

Additionally, Governor Bullock noted that while the monthly CPI update showed inflation remained steady, services inflation remains elevated— an ongoing concern for the central bank.

“The data are consistent with continuing excess demand in the economy and strong domestic cost pressures, both for labour and non-labour inputs,” Bullock said.

2. GDP Growth.

Recent National Accounts data from the ABS shows:

  • Weak national Gross Domestic Product (GDP) growth.
  • A slowdown in household discretionary spending.  
  • A rise in government spending, driven by social benefits.
  • A fall in both private and public investment.

Above: Australian economy slowed to a crawl, but continues to defy rate hikes as exports drive growth.

National income data (seasonally adjusted) for the December 2023 quarter:

  • GDP change of 0.2% for an annual increase of 1.5% down from 2.1 in the September quarter.
  • GDP per capita of -1.0% annually, compared to -0.3 in the September quarter.

While investment slowed, Katherine Keenan, ABS head of national accounts, said: “Government spending and private business investment were the main drivers of GDP growth this quarter.”

Did You Know?

Government-funded health products and services and a lift in the construction of data centres and warehouses were key contributors to growth.

On the household front, people spent more on essentials like electricity, rent and food but curbed spending on hotels, eating out, cigarettes and alcohol.

The Reserve Bank expects economic growth to remain below trend over 2024-2025 as higher rates weigh on consumer demand.

In its Statement on Monetary Policy from November 2023, the RBA stated: “The economy has proved to be more resilient in recent quarters than previously expected – which is supporting demand conditions for Australian businesses.” 

In fiscal policy, the Australian Government has made several budget cuts to help ease inflationary pressure, revealed in its Mid-Year Economic and Fiscal Outlook 2023-24 (MYEFO).

It found $9.8 billion in “savings and reprioritisations,” which comes from delayed infrastructure projects.

Although acknowledging economic growth would moderate due to inflation and higher interest rates, the Government stated:

“Continued public and business investment momentum and the ongoing recovery in the international student and tourism sectors are helping to offset this weakness and support growth in 2023–24.”

3. Unemployment.

Higher interest rates put upward pressure on unemployment. As the price of money increases, the cost of borrowing hurts companies’ bottom lines.

Lay-offs can ensue.

While the number of employed Aussies is currently high, more people are working fewer hours and participation has lifted — possibly due to people returning to work by necessity to cover rising living costs.

Seasonally adjusted ABS labour force figures from March 2024 show:

  • Australia’s unemployment rate is 3.8% (up 0.1% from February).
  • The underemployment rate is 6.5%.
  • The participation rate is 66.6% — down from a historic high of 67% in November 2023. The ABS said the number of hours employed people work has been declining, indicating that the labour market is now less tight than it has been.

A loosening labour market wouldn’t normally support further tightening of Australia’s interest rate.

Especially since RBA forecasts that growth in real incomes (salaries adjusted for inflation) won’t pick up until mid-2024.

Above: Real wage growth is back, and slightly earlier than forecast by Treasury.

4. Consumer Sentiment.

A major contributor to the nation’s economic growth is how everyday Australians spend their money.

Economists are keen to understand whether people feel financially flush and ready to buy, as a guide to likely reductions, or growth, in consumption.

Consumer sentiment was low throughout 2023.

Here’s what Australia’s two key consumer sentiment surveys indicate currently:

Nearly a third of respondents expect ‘bad times’ for the Australian economy, with just 8% expecting ‘good times’ ahead.


The survey found a sharp deterioration in buyer sentiment. People expect progress on inflation to be slow, and over 40% of Australians surveyed expected mortgage interest rates to rise in 2024.

5. Global Economy.

How other major economies are faring influences Australia’s trade: the cost of our imports, the value of our exports, and the purchasing power of the $AUD for ordinary people.

Global growth is expected to slow over the next two years as nations emerge from a high-inflation environment.


China’s flagging property market is a key risk for our economy, given that China is our largest trading partner.

Bloomberg reports that G-20 finance chiefs believe a soft landing was becoming more likely:

“Risks to the global economic outlook are more balanced. Upside risks include faster-than-expected disinflation.”

The general buoyancy of countries like the US and the UK also provides forewarning of global economic conditions that can buffet Australia.

An apparent flare-up of inflation in the US, whose economy is also growing more slowly, could put the RBA on edge. Or, deepen its cautiousness — in an effort to avoid having to reverse on stated intentions of rate cuts — as the US Federal Reserve has now been forced to.

US Federal Reserve Chair Jerome Powell said in March:

“When we do get that confidence, and we’re not far from it, it’ll be appropriate to dial back the level of restriction so that we don’t drive the economy into recession.”

Three cuts in 2024 were still on the cards then, but the Fed now thinks just one may be possible after the US CPI rose for a third straight month in March.

Powell said at the Fed’s May meeting — where the bank decided to hold rates — that a rate hike was unlikely.

The US and the UK pushed rates higher than Australia in 2023 to curb inflation, and many felt their efforts would pay off.

  • US inflation is rising moderately. Recent CPI figures were higher-then-expected — with a 0.4% rise in March and February and a 0.3% rise in January. But annual inflation is at 3.5%, compared to 3.7% in September 2023.
  • UK inflation is trending downwards. Its annual CPI in February 2024 was 3.2%, a huge difference to the 10.4% inflation the Kingdom was experiencing in February 2023.

Expectations of imminent interest rate cuts have diminished in both the US and the UK.

  • The US’ Interest rates are currently at 5.25% – 5.50%.
  • The UK’s bank rate is currently 5.25%.

Both central banks held rates at their most recent meetings in March 2024 — both are waiting to feel more confident that inflations is on downward trend.

Rate cutting in the US and the UK would make the greenback and pound less attractive to investors, which could boost the strength of the Australian dollar on the Forex market.

That should reduce the price of imports and further slow inflation domestically. 

Final Words On The Interest Rate Outlook For 2024.

How rates move in 2024 will depend on whether the RBA’s tightening cycle has done its job.

Has the inflation beast been slain, or will consumer demand, global turmoil and commodity prices continue to destabilise economies and push prices higher? Only time will tell.


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    Given that China’s economy is going down the toilet how the heck do we expect an appreciation of the Aussie in 2024 ? We are tied to China.

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