Back-to-back rate cuts pencilled in after GDP per capita falls 0.2 per cent in March quarter, Ben Picton predicts
Australia's poor growth in the March quarter could guarantee back-to-back interest rate cuts for mortgage holders continuing to struggle with repayments, an economist has predicted.
The Australian Bureau of Statistics on Wednesday revealed the nation's gross domestic product per capita fell 0.2 per cent, putting the nation back into per capita recession territory.
However, the slump may set Aussies up for another rate cut after the Reserve Bank of Australia meets in July with consecutive cuts to bolster the economy seemingly on the cards.
Ben Picton, a senior strategist at Rabobank, said the slide means the central bank will be forced to reassess the state of the nation, particularly as household consumption was lacklustre in the quarter.
'You can't polish this one, it was a poor growth figure,' Mr Picton told Sky News Business Now.
'The RBA will look at that and they will be thinking they've maybe got their sums wrong a little bit on what their expectations for what the resilience of the household sector was.'
When revealing the nation's growth slump, the ABS said a pullback in government spending and the ramifications of ex-Tropical Cyclone Alfred hurt the local economy.
Mr Picton said reduced public spending meant the nation's 'safety net was removed a little bit for the economy'.
'So that maybe does put the onus back on (the RBA) to some degree to start to ease monetary policy a little more aggressively,' he said.
'We've got a cut pencilled in for July. We're also expecting a cut in August, so more easing on the way, we think.'
The nation was in a per capita recession - consecutive quarters where population growth outpaced economic growth - for 21 months before the economy picked up in the December 2024 quarter.
If Australia records another quarter of population growth outpacing economic growth, it will again be in a per capita recession.
AMP's deputy chief economist said growth coming in slower than the RBA had previously expected was cause for another cut in July.
'This gloomy growth outlook argues for more interest rate relief from the RBA, as the economy is travelling slower than expected (the RBA's forecasts assumed March quarter growth around 0.5 per cent),' Ms Mousina said in a recent report.
'We had been expecting another 0.25 per cent rate cut at the August, November and February board meetings but now expect another 0.25 per cent cut in July.
'This means that the cash rate is likely to end up around 2.85 per cent at the end of the rate cutting cycle.'
The cash rate sits at 3.85 per cent and has been cut by 25 basis points twice in 2025.
It was held at 4.35 per cent for almost a year and a half to stamp out post-pandemic inflation.
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