How low can they go? Growth and jobs to rule rates call
After the central bank cut the cash rate by a quarter percentage to 3.6 per cent on Tuesday, Governor Michele Bullock raised hopes of more rate reductions to come.
While she wouldn't specifically state where the cash rate would end up when all is said and done, Ms Bullock indicated more cuts would be consistent with the RBA meeting its targets of low inflation and full employment.
The bank's quarterly economic forecasts, also released on Tuesday, assumed two more cuts, based on market pricing.
"You'll note that in the forecasts, we have inflation coming back down to target and the unemployment rate remaining where it is with a couple more cash rate cuts in there," Ms Bullock said.
"That's the best sort of guess, but things can change."
Money markets continued to price in two more cuts by early 2026, following the decision.
But traders were less hopeful that the RBA would deliver another cut at its next meeting in September, pricing in about a one-third chance.
Ms Bullock said the board would take things "meeting-by-meeting", keeping a close eye on upcoming data releases to ensure the economy continues to progress in line with the RBA's aims.
CBA senior economist Belinda Allen expects the RBA to wait until November before cutting again, but that could shift depending on how the data unfolds.
"The governor did not rule out back‑to‑back cuts. Inflation appears under control, so any acceleration of the cutting cycle we expect would have to be driven by a deterioration in the labour market," she said.
Ms Allen said the most important data readings before the next meeting would be labour force surveys released on Thursday and in September, as well as economic growth figures for the June quarter to be released on September 3.
RBA staff lowered their GDP growth forecasts as they pared back their expectations for trend productivity growth from one per cent to 0.7 per cent per year.
Australia's economy is now expected to expand by 1.7 per cent - down from 2.1 per cent - in 2025.
While the uncertainty caused by Donald Trump's trade war had eased, there remained risks to growth.
"Recent international developments have so far had little discernible impact on the Australian economy," the RBA's Statement on Monetary Policy said.
But given the typical lag, any discernible effects were only expected to start showing up in the second half of 2025 or 2026.
While labour force figures are key to the RBA's assessment of the tightness of the jobs market, the bank will keep an eye on wage growth data on Wednesday to confirm low unemployment isn't contributing to an unsustainable rise in wages.
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