NAB chief economist Sally Auld explains why Aussies will see three more rate cuts in 2025 after RBA cut cash rate in May

Sky News AU

21-05-2025

NAB's chief economist Sally Auld has explained why Aussies could be in line for three more rate cuts this year after the Reserve Bank of Australia delivered its second.
The RBA on Tuesday lowered the cash rate from 4.1 per cent to 3.85 per cent in a move largely predicted by money markets.
It follows the cash rate being held at 4.35 per cent for almost 18 months as the RBA engineered a 'soft landing' from high post-pandemic inflation.
Ms Auld said the reduction of inflation, economic uncertainty from the US-instigated trade war and lacklustre consumer spending meant the central bank would take a 'neutral policy setting'.
This means the RBA is taking the middle ground between a restrictive approach, which would see it hold or hike rates, or a stimulatory approach, which means many more rate cuts that would be used if the economy deteriorated.
The central bank took the second approach in early 2020 when it reduced the cash rate to 0.1 per cent.
'At NAB, we think (the RBA is) probably going to choose that middle path and actually anchor towards a neutral policy setting and on our estimates, that's another three rate cuts from now,' Ms Auld told Sky News Business on Wednesday.
After the new rate cut comes into effect, an Aussie with the average owner-occupier home loan of $659,920 would save $213 monthly and $2,553 annually compared to their repayments in 2024, according to comparison site Finder.
Many economists and banks are predicting two more 0.25 per cent rate cuts this year, bringing the total monthly savings to $420 and $5,044 annually compared to last year.
If NAB's forecast is correct, the savings could be around $6,300 per year for an average household.
Commonwealth Bank of Australia and Westpac are each expecting two more 0.25 per cent interest rate cuts in 2025 to bring the cash rate down to 3.35 per cent.
ANZ is expecting three consecutive cuts including the May call, bringing the cash rate to 3.35 per cent in August.
RBA Governor Michele Bullock said the central bank's decision was a "confident cut", but noted she remained on watch for economic uncertainty from the global trade war.
"I think it's a confident cut in the sense that we think this is the right decision at this point in time," Ms Bullock told reporters after her decision.
"Where this leads us in the future is a little more uncertain. I'd have to say probably a lot more uncertain, given everything that's going on."