RBA interest rate decision live: Much-needed relief delivered but Aussies warned of 'uncertain' future

Yahoo

20-05-2025

Hello and welcome to Yahoo Finance's live coverage of the RBA's interest rate decision. As expected, the central bank has cut the cash rate by 25 basis points to 3.85 per cent.
A fair bit has changed since the last time the board met at the start of April, notably Donald Trump unleashing his Liberation Day tariffs, which sent shockwaves across global markets.
And while the uncertainty continues, the RBA was not to be deterred with key indicators heading in the right direction for Australia.
Where the RBA goes from here will of course be interesting, with the board keeping a close eye on employment and wage growth which could have impacts for mortgage holders in the long run.
Follow along below as we bring you all the reaction to the decision.
Let's take a look at the RBA's accompanying statement with its rate cut.
It started positively by noting inflation is set to be where the RBA wants it for what they believe will be a long period, in that target band of 2 to 3 per cent.
But once again 'uncertainty' was the key word from then on in, with Donald Trump's unpredictable tariffs and geopolitical issues fuelling those fears.
And the RBA noted a "severe downside scenario", such as significant levies from the US, was still a concern, meaning the board remains cautious moving ahead.
NAB has quickly leapt on the RBA's decision, announcing that it will pass on the full 0.25 per cent interest rate cut.
"This provides some relief for those customers still dealing with cost of living challenges," NAB Group Executive for Personal Banking Ana Marinkovic said.
Borrowers with a standard variable home loan can ask for the decrease from next Friday.
Marinkovic has reminded mortgage holders that a cut is not automatically applied and must be requested through the app.
'More than 95 per cent of NAB customers opted to keep their repayments at the same level when rates last decreased, choosing to pay down their home loan quicker and save more in the long term,' Marinkovic said.
A customer with a 30-year mortgage of $550,000 would save $83,000 in interest over the life of the loan and pay it off two years earlier if they kept repayments the same following a 0.25 per cent reduction in rates.
We will be keeping an eye on how all the big banks react. You can follow on here.
Well there we have it. The RBA, as expected, has cut the cash rate by 25 basis points.
The interest rate is now 3.85 per cent and its the first time in exactly two years we've seen the rate with a 3 at the start. I'm sure plenty of you out there are hoping that 2 remains there for a while.
OK, we're just half an hour from the RBA revealing their decision. We'll be bringing you the details of its accompanying statement, as well as all the key lines when Treasurer Jim Chalmers and RBA boss Michele Bullock front media. Stay tuned.
One thing a rate cut in just under an hour's time will most likely do is see house prices drive up.
Little Real Estate executive general manager of property services Anne Crarey said she was already seeing a trend of first-home buyers, along with investors, returning to the market ahead of the expected interest rate cuts.
'I think it's actually a very clever strategy because interest rates are on the decline and we are expecting a cut next week, it is going to move more purchases into the market,' she told Yahoo Finance.
'More competition could potentially drive prices higher. So I do think if you're ready to buy now, you should be buying now.
'The reduction of interest rates is going to most likely drive prices up.'
In an update overseas, China's state banks are set to cut their deposit rates. It comes after Beijing ramped up stimulus measures in a bid to soften the economic fallout from Donald Trump's trade war.
Economist Stephen Koukoulas said it was another reason the RBA should go hard later today.
Have a look at his reasoning below.
Homeowners are expecting to receive a bit of relief come 2.30pm, but Australians have been told not to wait around.
'While plenty of Australians will be waiting with crossed fingers and toes come 2.30pm, variable borrowers can do more than this," Canstar.com.au's data insights director, Sally Tindall said.
'Call your bank and ask for a rate cut before the RBA hands down its decision – that way you could be in line for two cuts, rather than just one."
While you've not long left, it's well worth a try.
Tindall said it's also worth looking at refinancing to see if you can get a better deal.
"Lenders are lining up to hand out competitive rates to new customers, often ahead of existing loyal ones, so it might be time to turn yourself into a sought after commodity by making the switch," she said.
It's not what homeowners want to be thinking about right now, but one top economist says we need to be aware rate hikes could be on the horizon.
Judo Bank chief economic advisor Warren Hogan says the 'window for interest rate cuts is closing" and believes a cut today would be the last for a while, before the rate could start to tick upwards again.
'We will probably get one this week but in the absence of a tariff-induced global shock, we are unlikely to see any more cuts after that,' Hogan wrote in an opinion piece for The Australian Financial Review.
'Indeed, the natural rhythm of the economic cycle suggests rate increases could be back in play before too long.'
While there's plenty of predictions of a rate cut later on, five of Finder's 41 experts who gave their prediction on what will be delivered said the cash rate will be held at 4.1 per cent.
Let's see their reasons why.
Cameron Murray, University of Sydney: "Honestly, a bit of a guess. Inflation is in the target band. Not big changes globally. So where would be the economic impetus for change?"
Jakob Madsen, University of Western Australia: "Not much has changed since last meeting."
Mark Crosby, Monash University: "US policy randomness is settling into a pattern of reversals which make US and global slowdowns less likely."
Mala Raghavan, University of Tasmania: "Though 'Trump Tariff' created lots of anxiety and uncertainty. Looking at some of Australia's key indicators, they appear to be moving in the right direction.
"Inflation rate is within target i.e. 2.4% (12 months to the March quarter), while consumer spending remains unchanged and the selected living cost indexes are between 2.4% to 3.5% while business indicators are pointing to the right direction. Given these scenarios, I think the RBA will hold the cash rate this round."
Malcolm Wood, Ord Minnett: "The labour market remains tight, driving above trend wages growth. With no productivity growth, this puts unit labour costs above the RBA's inflation target."
By the end of last year, it felt like the whole country was calling for a rate cut. With predictions of a first rate cut in years repeatedly pushed back, homeowners eventually got one in February.
But Commonwealth has revealed some surprising data, sharing that just 14 per cent of home loan customers reduced their home loan repayments. That meant most of their customers decided not to take the on-average $80 monthly saving, meaning things might not have been as tight as first thought.
As Canstar points out, such a decision could significantly reduce the amount of interest paid on a mortgage. If homeowners with a $600k mortgage did so for four cuts of 25 basis points, they could save $89,000 in interest payments over the course of their mortgage, cutting four years off the time it takes to pay in the process.
We previously asked our readers after February's cut how many more cuts they'd need to feel comfortable. The majority said they'd need four more, which is beyond what three of the big four banks are predicting.
Have your say in the poll below if you haven't already.
Let's just remind ourselves of the journey we've been on since the cash rate headed north from the record low of 0.1 per cent.
As Finance Minister Katy Gallagher reiterated to the ABC this morning, it's certainly "been hard for households" over the last few years with the interest rate climbing to 4.35 per cent in an 18-month period.
We spent over a year at that level, before it was finally cut in February.
While Acting Prime Minister Richard Marles yesterday refused to offer his two cents on the RBA's impending decision, Treasurer Jim Chalmers has been suggesting we're in a great place for a rate cut.
Following last week's employment data, he says Australians should be buoyed by recent developments.
'Amid all the uncertainty and volatility in the global economy, our labour market remains an encouraging source of strength,' Treasurer Chalmers said in a statement.
'Low unemployment and much lower inflation is a remarkable combination and means we are well placed and well prepared for the challenges coming at us from abroad.'
It's certainly a confident stance from Chalmers, whose tone appears far more relaxed than before the election, where he denied pressuring the RBA to cut rates to give Australians relief before the nation voted on May 3.
Nicola Powell, chief economist at property portal Domain, said an interest rate cut was pretty much a given and has pointed to two things – trimmed inflation and the US president.
She says Donald Trump's tariffs policy has bolstered the case for a cut to support the Australian economy, amid an anticipated global slowdown.
"Obviously, it's going to be at the forefront of [the RBA board's] mind, the impact that that is going to have on the domestic economy," Dr Powell told AAP.
"When you look at trimmed mean inflation, it's now within their [target] band [of two to three per cent]. And we know that the RBA likes to really be guided by that trimmed mean inflation."
Two data points were released last week that were technically good news for the country, but sparked concern from some experts about their impact on the Reserve Bank's decision-making.
The Australian Bureau of Statistics showed wages jumped 0.9 per cent in the March quarter to 3.4 per cent, which came in just above forecasts of 0.8 per cent. That meant wages are up 1 per cent compared with headline inflation, which came in at 2.4 per cent for the same period.
This lift in pay was mainly attributed to a boost in awards and in public service jobs.
The following day, it was revealed that employment rose by 89,000 in the month of April, which thrashed expectations of a 20,000-person lift.
The pressure is now on the Australian economy to show an increase in productivity, which RBA governor Michele Bullock has previously hinted is vital.
'If productivity didn't pick up, then that means that the rate of nominal wages growth that can be sustained and be in line with the inflation target is lower,' she said.
Australia's current productivity growth is at minus 1.2 per cent.
KPMG chief economist Brendan Rynne said the RBA could use productivity as an indicator that rates should be held.
'If productivity growth does not pick up, the inevitable question will be whether the strong wages growth will flow through to inflation,' he said. 'This upside risk, combined with the risks related to trade policies around the globe, will test the RBA at its next meeting.'
Oxford Economics Australia head of macroeconomic forecasting Sean Langcake said even though there was a "upside surprise" in wages, he still expects a 25 basis point reduction in the cash rate.
Let's see what the other big banks are saying. While we just mentioned NAB are standing by a 50 basis points cut today, the other three believe a rate of 25 basis points will be delivered.
And when it comes to long-term predictions, NAB is again the outlier, believing an aggressive cutting cycle from the RBA is coming. ANZ is the most reserved, believing it will take until 2026 for the cash rate to reach 3.35 per cent.
Most market economists are predicting Australian homeowners will be delivered another rate cut of 25 basis points later today, despite employment data last week offering food for thought for the RBA board.
If the 25 basis points cut is delivered today, which would be the second cut of that size in three meetings, it will be the first time we've seen the cash rate fall by 50 basis points since March 2020.
Some are pushing for more though. Economist and Yahoo Finance contributor Stephen Koukoulas says it's time for the RBA to ditch its baby steps and go hard with a 50 basis points cut.
NAB too is standing by its bold prediction Australians will be given a supersized 50 basis points cut. One of those hasn't been seen in 13 years, when the RBA delivered such a cut in 2012.Let's take a look at the RBA's accompanying statement with its rate cut.
It started positively by noting inflation is set to be where the RBA wants it for what they believe will be a long period, in that target band of 2 to 3 per cent.
But once again 'uncertainty' was the key word from then on in, with Donald Trump's unpredictable tariffs and geopolitical issues fuelling those fears.
And the RBA noted a "severe downside scenario", such as significant levies from the US, was still a concern, meaning the board remains cautious moving ahead.
NAB has quickly leapt on the RBA's decision, announcing that it will pass on the full 0.25 per cent interest rate cut.
"This provides some relief for those customers still dealing with cost of living challenges," NAB Group Executive for Personal Banking Ana Marinkovic said.
Borrowers with a standard variable home loan can ask for the decrease from next Friday.
Marinkovic has reminded mortgage holders that a cut is not automatically applied and must be requested through the app.
'More than 95 per cent of NAB customers opted to keep their repayments at the same level when rates last decreased, choosing to pay down their home loan quicker and save more in the long term,' Marinkovic said.
A customer with a 30-year mortgage of $550,000 would save $83,000 in interest over the life of the loan and pay it off two years earlier if they kept repayments the same following a 0.25 per cent reduction in rates.
We will be keeping an eye on how all the big banks react. You can follow on here.
Well there we have it. The RBA, as expected, has cut the cash rate by 25 basis points.
The interest rate is now 3.85 per cent and its the first time in exactly two years we've seen the rate with a 3 at the start. I'm sure plenty of you out there are hoping that 2 remains there for a while.
OK, we're just half an hour from the RBA revealing their decision. We'll be bringing you the details of its accompanying statement, as well as all the key lines when Treasurer Jim Chalmers and RBA boss Michele Bullock front media. Stay tuned.
One thing a rate cut in just under an hour's time will most likely do is see house prices drive up.
Little Real Estate executive general manager of property services Anne Crarey said she was already seeing a trend of first-home buyers, along with investors, returning to the market ahead of the expected interest rate cuts.
'I think it's actually a very clever strategy because interest rates are on the decline and we are expecting a cut next week, it is going to move more purchases into the market,' she told Yahoo Finance.
'More competition could potentially drive prices higher. So I do think if you're ready to buy now, you should be buying now.
'The reduction of interest rates is going to most likely drive prices up.'
In an update overseas, China's state banks are set to cut their deposit rates. It comes after Beijing ramped up stimulus measures in a bid to soften the economic fallout from Donald Trump's trade war.
Economist Stephen Koukoulas said it was another reason the RBA should go hard later today.
Have a look at his reasoning below.
Homeowners are expecting to receive a bit of relief come 2.30pm, but Australians have been told not to wait around.
'While plenty of Australians will be waiting with crossed fingers and toes come 2.30pm, variable borrowers can do more than this," Canstar.com.au's data insights director, Sally Tindall said.
'Call your bank and ask for a rate cut before the RBA hands down its decision – that way you could be in line for two cuts, rather than just one."
While you've not long left, it's well worth a try.
Tindall said it's also worth looking at refinancing to see if you can get a better deal.
"Lenders are lining up to hand out competitive rates to new customers, often ahead of existing loyal ones, so it might be time to turn yourself into a sought after commodity by making the switch," she said.
It's not what homeowners want to be thinking about right now, but one top economist says we need to be aware rate hikes could be on the horizon.
Judo Bank chief economic advisor Warren Hogan says the 'window for interest rate cuts is closing" and believes a cut today would be the last for a while, before the rate could start to tick upwards again.
'We will probably get one this week but in the absence of a tariff-induced global shock, we are unlikely to see any more cuts after that,' Hogan wrote in an opinion piece for The Australian Financial Review.
'Indeed, the natural rhythm of the economic cycle suggests rate increases could be back in play before too long.'
While there's plenty of predictions of a rate cut later on, five of Finder's 41 experts who gave their prediction on what will be delivered said the cash rate will be held at 4.1 per cent.
Let's see their reasons why.
Cameron Murray, University of Sydney: "Honestly, a bit of a guess. Inflation is in the target band. Not big changes globally. So where would be the economic impetus for change?"
Jakob Madsen, University of Western Australia: "Not much has changed since last meeting."
Mark Crosby, Monash University: "US policy randomness is settling into a pattern of reversals which make US and global slowdowns less likely."
Mala Raghavan, University of Tasmania: "Though 'Trump Tariff' created lots of anxiety and uncertainty. Looking at some of Australia's key indicators, they appear to be moving in the right direction.
"Inflation rate is within target i.e. 2.4% (12 months to the March quarter), while consumer spending remains unchanged and the selected living cost indexes are between 2.4% to 3.5% while business indicators are pointing to the right direction. Given these scenarios, I think the RBA will hold the cash rate this round."
Malcolm Wood, Ord Minnett: "The labour market remains tight, driving above trend wages growth. With no productivity growth, this puts unit labour costs above the RBA's inflation target."
By the end of last year, it felt like the whole country was calling for a rate cut. With predictions of a first rate cut in years repeatedly pushed back, homeowners eventually got one in February.
But Commonwealth has revealed some surprising data, sharing that just 14 per cent of home loan customers reduced their home loan repayments. That meant most of their customers decided not to take the on-average $80 monthly saving, meaning things might not have been as tight as first thought.
As Canstar points out, such a decision could significantly reduce the amount of interest paid on a mortgage. If homeowners with a $600k mortgage did so for four cuts of 25 basis points, they could save $89,000 in interest payments over the course of their mortgage, cutting four years off the time it takes to pay in the process.
We previously asked our readers after February's cut how many more cuts they'd need to feel comfortable. The majority said they'd need four more, which is beyond what three of the big four banks are predicting.
Have your say in the poll below if you haven't already.
Let's just remind ourselves of the journey we've been on since the cash rate headed north from the record low of 0.1 per cent.
As Finance Minister Katy Gallagher reiterated to the ABC this morning, it's certainly "been hard for households" over the last few years with the interest rate climbing to 4.35 per cent in an 18-month period.
We spent over a year at that level, before it was finally cut in February.
While Acting Prime Minister Richard Marles yesterday refused to offer his two cents on the RBA's impending decision, Treasurer Jim Chalmers has been suggesting we're in a great place for a rate cut.
Following last week's employment data, he says Australians should be buoyed by recent developments.
'Amid all the uncertainty and volatility in the global economy, our labour market remains an encouraging source of strength,' Treasurer Chalmers said in a statement.
'Low unemployment and much lower inflation is a remarkable combination and means we are well placed and well prepared for the challenges coming at us from abroad.'
It's certainly a confident stance from Chalmers, whose tone appears far more relaxed than before the election, where he denied pressuring the RBA to cut rates to give Australians relief before the nation voted on May 3.
Nicola Powell, chief economist at property portal Domain, said an interest rate cut was pretty much a given and has pointed to two things – trimmed inflation and the US president.
She says Donald Trump's tariffs policy has bolstered the case for a cut to support the Australian economy, amid an anticipated global slowdown.
"Obviously, it's going to be at the forefront of [the RBA board's] mind, the impact that that is going to have on the domestic economy," Dr Powell told AAP.
"When you look at trimmed mean inflation, it's now within their [target] band [of two to three per cent]. And we know that the RBA likes to really be guided by that trimmed mean inflation."
Two data points were released last week that were technically good news for the country, but sparked concern from some experts about their impact on the Reserve Bank's decision-making.
The Australian Bureau of Statistics showed wages jumped 0.9 per cent in the March quarter to 3.4 per cent, which came in just above forecasts of 0.8 per cent. That meant wages are up 1 per cent compared with headline inflation, which came in at 2.4 per cent for the same period.
This lift in pay was mainly attributed to a boost in awards and in public service jobs.
The following day, it was revealed that employment rose by 89,000 in the month of April, which thrashed expectations of a 20,000-person lift.
The pressure is now on the Australian economy to show an increase in productivity, which RBA governor Michele Bullock has previously hinted is vital.
'If productivity didn't pick up, then that means that the rate of nominal wages growth that can be sustained and be in line with the inflation target is lower,' she said.
Australia's current productivity growth is at minus 1.2 per cent.
KPMG chief economist Brendan Rynne said the RBA could use productivity as an indicator that rates should be held.
'If productivity growth does not pick up, the inevitable question will be whether the strong wages growth will flow through to inflation,' he said. 'This upside risk, combined with the risks related to trade policies around the globe, will test the RBA at its next meeting.'
Oxford Economics Australia head of macroeconomic forecasting Sean Langcake said even though there was a "upside surprise" in wages, he still expects a 25 basis point reduction in the cash rate.
Let's see what the other big banks are saying. While we just mentioned NAB are standing by a 50 basis points cut today, the other three believe a rate of 25 basis points will be delivered.
And when it comes to long-term predictions, NAB is again the outlier, believing an aggressive cutting cycle from the RBA is coming. ANZ is the most reserved, believing it will take until 2026 for the cash rate to reach 3.35 per cent.
Most market economists are predicting Australian homeowners will be delivered another rate cut of 25 basis points later today, despite employment data last week offering food for thought for the RBA board.
If the 25 basis points cut is delivered today, which would be the second cut of that size in three meetings, it will be the first time we've seen the cash rate fall by 50 basis points since March 2020.
Some are pushing for more though. Economist and Yahoo Finance contributor Stephen Koukoulas says it's time for the RBA to ditch its baby steps and go hard with a 50 basis points cut.
NAB too is standing by its bold prediction Australians will be given a supersized 50 basis points cut. One of those hasn't been seen in 13 years, when the RBA delivered such a cut in 2012.