Latest news with #CherelleMurphy
The Advertiser
5 days ago
- Business
- The Advertiser
Rates cut but borrowers told not to bank on more relief
Borrowers have received welcome relief from the Reserve Bank of Australia, which delivered a widely expected interest rate cut but flagged the end to its easing cycle is getting closer. The central bank opted not to shock markets for a second time in two months on Tuesday, cutting the cash rate by 25 basis points to 3.6 per cent. In its accompanying statement, the RBA board said a further easing in monetary policy, following cuts in February and May, was appropriate because underlying inflation and the labour market had continued to ease. "The board nevertheless remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and potential supply," it said. Absent from the board's statement this time was a comment it felt monetary policy was still restrictive. As the cash rate gets closer to the unobservable "neutral" rate, the board would have to work harder to justify crossing into stimulatory territory, EY chief economist Cherelle Murphy said. "This will be a harder barrier for the Reserve Bank to cross but we think a likely one, with private consumption and investment still soft and risks persisting due to elevated global uncertainties," she said. RBA governor Michele Bullock said any further decisions would be taken "meeting-by-meeting" and based on economic data as it unfolds. All nine board members voted in favour of a cut and there was no discussion of a jumbo 50 basis point cut, Ms Bullock said. The RBA's decision will save borrowers with a $600,000 mortgage almost $90 a month in repayments and a cumulative $272 per month since cuts began in February. The move brings the cash rate to its lowest level since May 2023, with the average variable mortgage rate expected to fall to 5.5 per cent. But for many borrowers, the financial boost was behind schedule. Most economists had expected the RBA to deliver further rate relief in its July meeting. In a shock 6-3 decision, the board kept rates on hold, citing a need to wait for more inflation data to ensure price growth was coming down sustainably to target. The local share market lifted modestly and the Aussie dollar fell following the decision, while money markets were pricing in two more cuts by March. Vanguard senior economist Grant Feng predicted one more cut by the end of 2025, as growth showed signs of recovery and the unemployment rate stabilising. Treasurer Jim Chalmers said the decision was "very welcome relief for millions of Australians". "The three interest rate cuts we've seen this year would not have been possible without our collective efforts to get inflation down," he said. The RBA board in its statement noted uncertainty in the global economy was still high. But markets had settled down in recent months with a little bit more clarity to the scale of Donald Trump's tariffs and a fairly low amount of retaliation from other countries. In quarterly forecasts produced by RBA staff and released alongside the cash rate decision, productivity growth was revised down by 0.3 per cent over the medium term. That would flow through to lower GDP growth, lower living standards and make it harder to get inflation under control. All four big banks and challenger lender Macquarie announced they would pass on the cut in full to variable home loan borrowers. Borrowers have received welcome relief from the Reserve Bank of Australia, which delivered a widely expected interest rate cut but flagged the end to its easing cycle is getting closer. The central bank opted not to shock markets for a second time in two months on Tuesday, cutting the cash rate by 25 basis points to 3.6 per cent. In its accompanying statement, the RBA board said a further easing in monetary policy, following cuts in February and May, was appropriate because underlying inflation and the labour market had continued to ease. "The board nevertheless remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and potential supply," it said. Absent from the board's statement this time was a comment it felt monetary policy was still restrictive. As the cash rate gets closer to the unobservable "neutral" rate, the board would have to work harder to justify crossing into stimulatory territory, EY chief economist Cherelle Murphy said. "This will be a harder barrier for the Reserve Bank to cross but we think a likely one, with private consumption and investment still soft and risks persisting due to elevated global uncertainties," she said. RBA governor Michele Bullock said any further decisions would be taken "meeting-by-meeting" and based on economic data as it unfolds. All nine board members voted in favour of a cut and there was no discussion of a jumbo 50 basis point cut, Ms Bullock said. The RBA's decision will save borrowers with a $600,000 mortgage almost $90 a month in repayments and a cumulative $272 per month since cuts began in February. The move brings the cash rate to its lowest level since May 2023, with the average variable mortgage rate expected to fall to 5.5 per cent. But for many borrowers, the financial boost was behind schedule. Most economists had expected the RBA to deliver further rate relief in its July meeting. In a shock 6-3 decision, the board kept rates on hold, citing a need to wait for more inflation data to ensure price growth was coming down sustainably to target. The local share market lifted modestly and the Aussie dollar fell following the decision, while money markets were pricing in two more cuts by March. Vanguard senior economist Grant Feng predicted one more cut by the end of 2025, as growth showed signs of recovery and the unemployment rate stabilising. Treasurer Jim Chalmers said the decision was "very welcome relief for millions of Australians". "The three interest rate cuts we've seen this year would not have been possible without our collective efforts to get inflation down," he said. The RBA board in its statement noted uncertainty in the global economy was still high. But markets had settled down in recent months with a little bit more clarity to the scale of Donald Trump's tariffs and a fairly low amount of retaliation from other countries. In quarterly forecasts produced by RBA staff and released alongside the cash rate decision, productivity growth was revised down by 0.3 per cent over the medium term. That would flow through to lower GDP growth, lower living standards and make it harder to get inflation under control. All four big banks and challenger lender Macquarie announced they would pass on the cut in full to variable home loan borrowers. Borrowers have received welcome relief from the Reserve Bank of Australia, which delivered a widely expected interest rate cut but flagged the end to its easing cycle is getting closer. The central bank opted not to shock markets for a second time in two months on Tuesday, cutting the cash rate by 25 basis points to 3.6 per cent. In its accompanying statement, the RBA board said a further easing in monetary policy, following cuts in February and May, was appropriate because underlying inflation and the labour market had continued to ease. "The board nevertheless remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and potential supply," it said. Absent from the board's statement this time was a comment it felt monetary policy was still restrictive. As the cash rate gets closer to the unobservable "neutral" rate, the board would have to work harder to justify crossing into stimulatory territory, EY chief economist Cherelle Murphy said. "This will be a harder barrier for the Reserve Bank to cross but we think a likely one, with private consumption and investment still soft and risks persisting due to elevated global uncertainties," she said. RBA governor Michele Bullock said any further decisions would be taken "meeting-by-meeting" and based on economic data as it unfolds. All nine board members voted in favour of a cut and there was no discussion of a jumbo 50 basis point cut, Ms Bullock said. The RBA's decision will save borrowers with a $600,000 mortgage almost $90 a month in repayments and a cumulative $272 per month since cuts began in February. The move brings the cash rate to its lowest level since May 2023, with the average variable mortgage rate expected to fall to 5.5 per cent. But for many borrowers, the financial boost was behind schedule. Most economists had expected the RBA to deliver further rate relief in its July meeting. In a shock 6-3 decision, the board kept rates on hold, citing a need to wait for more inflation data to ensure price growth was coming down sustainably to target. The local share market lifted modestly and the Aussie dollar fell following the decision, while money markets were pricing in two more cuts by March. Vanguard senior economist Grant Feng predicted one more cut by the end of 2025, as growth showed signs of recovery and the unemployment rate stabilising. Treasurer Jim Chalmers said the decision was "very welcome relief for millions of Australians". "The three interest rate cuts we've seen this year would not have been possible without our collective efforts to get inflation down," he said. The RBA board in its statement noted uncertainty in the global economy was still high. But markets had settled down in recent months with a little bit more clarity to the scale of Donald Trump's tariffs and a fairly low amount of retaliation from other countries. In quarterly forecasts produced by RBA staff and released alongside the cash rate decision, productivity growth was revised down by 0.3 per cent over the medium term. That would flow through to lower GDP growth, lower living standards and make it harder to get inflation under control. All four big banks and challenger lender Macquarie announced they would pass on the cut in full to variable home loan borrowers. Borrowers have received welcome relief from the Reserve Bank of Australia, which delivered a widely expected interest rate cut but flagged the end to its easing cycle is getting closer. The central bank opted not to shock markets for a second time in two months on Tuesday, cutting the cash rate by 25 basis points to 3.6 per cent. In its accompanying statement, the RBA board said a further easing in monetary policy, following cuts in February and May, was appropriate because underlying inflation and the labour market had continued to ease. "The board nevertheless remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and potential supply," it said. Absent from the board's statement this time was a comment it felt monetary policy was still restrictive. As the cash rate gets closer to the unobservable "neutral" rate, the board would have to work harder to justify crossing into stimulatory territory, EY chief economist Cherelle Murphy said. "This will be a harder barrier for the Reserve Bank to cross but we think a likely one, with private consumption and investment still soft and risks persisting due to elevated global uncertainties," she said. RBA governor Michele Bullock said any further decisions would be taken "meeting-by-meeting" and based on economic data as it unfolds. All nine board members voted in favour of a cut and there was no discussion of a jumbo 50 basis point cut, Ms Bullock said. The RBA's decision will save borrowers with a $600,000 mortgage almost $90 a month in repayments and a cumulative $272 per month since cuts began in February. The move brings the cash rate to its lowest level since May 2023, with the average variable mortgage rate expected to fall to 5.5 per cent. But for many borrowers, the financial boost was behind schedule. Most economists had expected the RBA to deliver further rate relief in its July meeting. In a shock 6-3 decision, the board kept rates on hold, citing a need to wait for more inflation data to ensure price growth was coming down sustainably to target. The local share market lifted modestly and the Aussie dollar fell following the decision, while money markets were pricing in two more cuts by March. Vanguard senior economist Grant Feng predicted one more cut by the end of 2025, as growth showed signs of recovery and the unemployment rate stabilising. Treasurer Jim Chalmers said the decision was "very welcome relief for millions of Australians". "The three interest rate cuts we've seen this year would not have been possible without our collective efforts to get inflation down," he said. The RBA board in its statement noted uncertainty in the global economy was still high. But markets had settled down in recent months with a little bit more clarity to the scale of Donald Trump's tariffs and a fairly low amount of retaliation from other countries. In quarterly forecasts produced by RBA staff and released alongside the cash rate decision, productivity growth was revised down by 0.3 per cent over the medium term. That would flow through to lower GDP growth, lower living standards and make it harder to get inflation under control. All four big banks and challenger lender Macquarie announced they would pass on the cut in full to variable home loan borrowers.
Sky News AU
19-06-2025
- Business
- Sky News AU
Unemployment rate remains at 4.1 per cent for three consecutive months as markets continue to favour July cash rate cut
The unemployment rate has remained at 4.1 per cent for three months in a row as it continues to sit near historic lows since the nation came out of the Covid-19 pandemic. The data is critical for the Reserve Bank of Australia which will closely examine the unemployment rate ahead of its July cash rate decision when it is tipped to deliver mortgage holders more financial relief. Data from the Australian Bureau of Statistics showed employment fell by 2,000 during the month but remained up 2.3 per cent compared to May 2024. The participation rate remained at 67 per cent while the employment to population rate was steady at 64.3 per cent for May. EY Oceania chief economist Cherelle Murphy told Sky News the data made the case for a July rate cut as it showed Australia's labour market continued to be strong and there was little risk wages would be pushed up at a time when productivity remained low. 'Overall, the RBA will be pretty happy with this,' Ms Murphy said after the data was released. 'The economy really warrants another rate cut and that's because … both business investment and private consumption is running at fairly weak rates at the moment. 'The stance of monetary policy right now is restrictive ... it's actually slowing the economy down and that is not really appropriate for an economy where inflation is back under control and the private sectors not really spending.' Following the release of the unemployment data, the odds of a rate cut when the Reserve Bank of Australia meets in July has dropped 1.5 per cent to 66 per cent. Sky News' Business Editor Ross Greenwood said the shift was 'marginal' and the markets were 'not surprised' by the consistent unemployment rate. 'The odds are still in favour of the Reserve Bank cutting interest rates when they meet in just a little under a month's time,' Greenwood said. The RBA has cut rates twice in 2025 and is likely to deliver further cuts beyond the July call. It will also examine trimmed mean inflation – the middle 70 per cent of price changes in the consumer price index - which fell back into the RBA's 2-3 per cent target band in the March quarter. This was the first time since 2021 trimmed mean inflation was in the RBA's target band.
The Advertiser
04-06-2025
- Business
- The Advertiser
Economy stalls as private sector fails to pick up slack
Temporary factors might have dragged down Australia's economy but there are warning signs the challenges it faces are more entrenched. Economic growth figures, released by the Australian Bureau of Statistics on Wednesday, paint a gloomy picture. Gross domestic product slowed to 0.2 per cent in the first three months of 2025, down from a 0.6 per cent rise in the December quarter and weaker than economists had been expecting. "There was nothing to be happy about in the national accounts numbers today," mused EY's chief economist Cherelle Murphy. While Treasurer Jim Chalmers said any growth was a decent outcome, given global uncertainty, a return to falling GDP per capita - a common measure of living standards - is worrying news. There was a fair bit of bad luck in the numbers. Disruptions from Cyclone Alfred and flooding in Queensland and Northern NSW cut $2.2 billion from the national economy, Treasury estimates. Mining, tourism and shipping were particularly impacted, but underlying growth remains soft, particularly household consumption. The economy had been boosted in recent years by stronger public spending, but as state government infrastructure projects come off and energy rebates unwind, Dr Chalmers promised momentum would shift to the private sector. Westpac senior economist Pat Bustamante has been warning about the potential for a "shaky handover". "In line with our updated expectations, public demand fell and the private sector struggled to pick up the slack," he said. Public spending recorded the largest slowdown since the September quarter 2017, partly down to the government's efforts to curtail spending on the NDIS. But household consumption growth was softer than the previous quarter at 0.4 per cent. Even that was driven by a strong bounce in spending on electricity bills, as state government rebates lifted off. Dr Chalmers saw a silver lining in the figures. "There wasn't a lot of growth in March, but what growth there was was private-sector led, and that's an encouraging sign," he told reporters. The treasurer said Australia was still better placed than peer economies. "When you look at these numbers today, no major advanced economy has our combination of unemployment in the low fours, inflation below 2.5 per cent, and three years of continuous growth," he said. Declining interest rates and rising disposable income from real wages growth should boost household spending. But economic uncertainty from Donald Trump's tariffs remains a headwind. Trade barriers will continue to weigh on economic growth, with the worst effects of global uncertainty not expected to show up in the data until the June quarter. The Paris-based Organisation for Economic Cooperation and Development downgraded its forecast for Australia's GDP growth from 1.9 per cent to 1.8 per cent in 2025. But the outlook is rosier in 2026, with economic growth expected to accelerate to 2.2 per cent as interest rates continue to fall and disposable incomes recover. Rates markets implied about an 80 per cent chance for the RBA to cut interest rates by 25 basis points at its next meeting in July, with two more cuts expected by Christmas. Annual economic growth held steady at 1.3 per cent, meaning the economy would need to rise by 0.7 per cent in the June quarter to meet the Reserve Bank's forecast of 1.8 per cent growth year-on-year. An outcome below that would heighten the chance of further interest rate cuts. Temporary factors might have dragged down Australia's economy but there are warning signs the challenges it faces are more entrenched. Economic growth figures, released by the Australian Bureau of Statistics on Wednesday, paint a gloomy picture. Gross domestic product slowed to 0.2 per cent in the first three months of 2025, down from a 0.6 per cent rise in the December quarter and weaker than economists had been expecting. "There was nothing to be happy about in the national accounts numbers today," mused EY's chief economist Cherelle Murphy. While Treasurer Jim Chalmers said any growth was a decent outcome, given global uncertainty, a return to falling GDP per capita - a common measure of living standards - is worrying news. There was a fair bit of bad luck in the numbers. Disruptions from Cyclone Alfred and flooding in Queensland and Northern NSW cut $2.2 billion from the national economy, Treasury estimates. Mining, tourism and shipping were particularly impacted, but underlying growth remains soft, particularly household consumption. The economy had been boosted in recent years by stronger public spending, but as state government infrastructure projects come off and energy rebates unwind, Dr Chalmers promised momentum would shift to the private sector. Westpac senior economist Pat Bustamante has been warning about the potential for a "shaky handover". "In line with our updated expectations, public demand fell and the private sector struggled to pick up the slack," he said. Public spending recorded the largest slowdown since the September quarter 2017, partly down to the government's efforts to curtail spending on the NDIS. But household consumption growth was softer than the previous quarter at 0.4 per cent. Even that was driven by a strong bounce in spending on electricity bills, as state government rebates lifted off. Dr Chalmers saw a silver lining in the figures. "There wasn't a lot of growth in March, but what growth there was was private-sector led, and that's an encouraging sign," he told reporters. The treasurer said Australia was still better placed than peer economies. "When you look at these numbers today, no major advanced economy has our combination of unemployment in the low fours, inflation below 2.5 per cent, and three years of continuous growth," he said. Declining interest rates and rising disposable income from real wages growth should boost household spending. But economic uncertainty from Donald Trump's tariffs remains a headwind. Trade barriers will continue to weigh on economic growth, with the worst effects of global uncertainty not expected to show up in the data until the June quarter. The Paris-based Organisation for Economic Cooperation and Development downgraded its forecast for Australia's GDP growth from 1.9 per cent to 1.8 per cent in 2025. But the outlook is rosier in 2026, with economic growth expected to accelerate to 2.2 per cent as interest rates continue to fall and disposable incomes recover. Rates markets implied about an 80 per cent chance for the RBA to cut interest rates by 25 basis points at its next meeting in July, with two more cuts expected by Christmas. Annual economic growth held steady at 1.3 per cent, meaning the economy would need to rise by 0.7 per cent in the June quarter to meet the Reserve Bank's forecast of 1.8 per cent growth year-on-year. An outcome below that would heighten the chance of further interest rate cuts. Temporary factors might have dragged down Australia's economy but there are warning signs the challenges it faces are more entrenched. Economic growth figures, released by the Australian Bureau of Statistics on Wednesday, paint a gloomy picture. Gross domestic product slowed to 0.2 per cent in the first three months of 2025, down from a 0.6 per cent rise in the December quarter and weaker than economists had been expecting. "There was nothing to be happy about in the national accounts numbers today," mused EY's chief economist Cherelle Murphy. While Treasurer Jim Chalmers said any growth was a decent outcome, given global uncertainty, a return to falling GDP per capita - a common measure of living standards - is worrying news. There was a fair bit of bad luck in the numbers. Disruptions from Cyclone Alfred and flooding in Queensland and Northern NSW cut $2.2 billion from the national economy, Treasury estimates. Mining, tourism and shipping were particularly impacted, but underlying growth remains soft, particularly household consumption. The economy had been boosted in recent years by stronger public spending, but as state government infrastructure projects come off and energy rebates unwind, Dr Chalmers promised momentum would shift to the private sector. Westpac senior economist Pat Bustamante has been warning about the potential for a "shaky handover". "In line with our updated expectations, public demand fell and the private sector struggled to pick up the slack," he said. Public spending recorded the largest slowdown since the September quarter 2017, partly down to the government's efforts to curtail spending on the NDIS. But household consumption growth was softer than the previous quarter at 0.4 per cent. Even that was driven by a strong bounce in spending on electricity bills, as state government rebates lifted off. Dr Chalmers saw a silver lining in the figures. "There wasn't a lot of growth in March, but what growth there was was private-sector led, and that's an encouraging sign," he told reporters. The treasurer said Australia was still better placed than peer economies. "When you look at these numbers today, no major advanced economy has our combination of unemployment in the low fours, inflation below 2.5 per cent, and three years of continuous growth," he said. Declining interest rates and rising disposable income from real wages growth should boost household spending. But economic uncertainty from Donald Trump's tariffs remains a headwind. Trade barriers will continue to weigh on economic growth, with the worst effects of global uncertainty not expected to show up in the data until the June quarter. The Paris-based Organisation for Economic Cooperation and Development downgraded its forecast for Australia's GDP growth from 1.9 per cent to 1.8 per cent in 2025. But the outlook is rosier in 2026, with economic growth expected to accelerate to 2.2 per cent as interest rates continue to fall and disposable incomes recover. Rates markets implied about an 80 per cent chance for the RBA to cut interest rates by 25 basis points at its next meeting in July, with two more cuts expected by Christmas. Annual economic growth held steady at 1.3 per cent, meaning the economy would need to rise by 0.7 per cent in the June quarter to meet the Reserve Bank's forecast of 1.8 per cent growth year-on-year. An outcome below that would heighten the chance of further interest rate cuts. Temporary factors might have dragged down Australia's economy but there are warning signs the challenges it faces are more entrenched. Economic growth figures, released by the Australian Bureau of Statistics on Wednesday, paint a gloomy picture. Gross domestic product slowed to 0.2 per cent in the first three months of 2025, down from a 0.6 per cent rise in the December quarter and weaker than economists had been expecting. "There was nothing to be happy about in the national accounts numbers today," mused EY's chief economist Cherelle Murphy. While Treasurer Jim Chalmers said any growth was a decent outcome, given global uncertainty, a return to falling GDP per capita - a common measure of living standards - is worrying news. There was a fair bit of bad luck in the numbers. Disruptions from Cyclone Alfred and flooding in Queensland and Northern NSW cut $2.2 billion from the national economy, Treasury estimates. Mining, tourism and shipping were particularly impacted, but underlying growth remains soft, particularly household consumption. The economy had been boosted in recent years by stronger public spending, but as state government infrastructure projects come off and energy rebates unwind, Dr Chalmers promised momentum would shift to the private sector. Westpac senior economist Pat Bustamante has been warning about the potential for a "shaky handover". "In line with our updated expectations, public demand fell and the private sector struggled to pick up the slack," he said. Public spending recorded the largest slowdown since the September quarter 2017, partly down to the government's efforts to curtail spending on the NDIS. But household consumption growth was softer than the previous quarter at 0.4 per cent. Even that was driven by a strong bounce in spending on electricity bills, as state government rebates lifted off. Dr Chalmers saw a silver lining in the figures. "There wasn't a lot of growth in March, but what growth there was was private-sector led, and that's an encouraging sign," he told reporters. The treasurer said Australia was still better placed than peer economies. "When you look at these numbers today, no major advanced economy has our combination of unemployment in the low fours, inflation below 2.5 per cent, and three years of continuous growth," he said. Declining interest rates and rising disposable income from real wages growth should boost household spending. But economic uncertainty from Donald Trump's tariffs remains a headwind. Trade barriers will continue to weigh on economic growth, with the worst effects of global uncertainty not expected to show up in the data until the June quarter. The Paris-based Organisation for Economic Cooperation and Development downgraded its forecast for Australia's GDP growth from 1.9 per cent to 1.8 per cent in 2025. But the outlook is rosier in 2026, with economic growth expected to accelerate to 2.2 per cent as interest rates continue to fall and disposable incomes recover. Rates markets implied about an 80 per cent chance for the RBA to cut interest rates by 25 basis points at its next meeting in July, with two more cuts expected by Christmas. Annual economic growth held steady at 1.3 per cent, meaning the economy would need to rise by 0.7 per cent in the June quarter to meet the Reserve Bank's forecast of 1.8 per cent growth year-on-year. An outcome below that would heighten the chance of further interest rate cuts.
Daily Mail
04-06-2025
- Business
- Daily Mail
Australia is on the brink of sliding back into another 'recession'
Australia's economic output is shrinking again as immigration soars - threatening to quickly send the country back into a per capita recession. Gross domestic product per capita - or the average amount produced by every Australian - shrunk by 0.2 per cent in the March quarter, new national accounts data released on Wednesday showed. Australia had been in a per capita recession from early 2023 until the September quarter of 2024 during a period coinciding with record-high immigration. This marked the worst stagnation in output since the early 1980s. Now GDP per capita sunk into negative territory again in the March quarter, and figures also showed p roductivity was flat for the same period, resulting in a one per cent decline over the year. Weaker hourly output also potentially risks pushing up inflation as it increases the wage toll on businesses, who pass the additional cost on to consumers via higher prices. Westpac senior economist Pat Bustamante said Australia risked having both weak economic growth and a return to high inflation. 'This leaves policymakers stuck between supporting growth and managing inflation risks,' he said. EY chief economist Cherelle Murphy said the Albanese government has made little progress toward tackling the productivity crisis. 'Productivity growth was flat in the quarter and down over the year, with no evidence that Australia is making any progress in shifting the problem which worsened in the immediate aftermath of the pandemic,' she said. Immigration levels were still high in the year to March with 437,440 people moving to Australia on a net permanent and long-term basis, with this net figure factoring in skilled migrants and international students. The Institute of Public Affairs think tank noted that since Labor came to power in May 2022, Australia's GDP per capita had fallen by 1.7 per as the population grew by 5.9 per cent. IPA fellow Kevin You said this simply made Australians poorer. 'As the federal government has relied on the lazy approach of mass migration to keep the aggregate economy afloat, the overall economic pie may have continued to grow at a headline level, but each Australian is being left with an ever-shrinking slice,' he said. Treasurer Jim Chalmers trumpeted a 0.2 per cent increase in GDP for the quarter not adjusted for population - and 1.3 per cent for the year as an achievement. 'Today's national accounts show that our economy continues to grow in the face of substantial economic headwinds at home and abroad,' he said. 'While overall growth in the Australian economy remains subdued, the private sector recovery we have planned and prepared for is gradually taking hold. With all the uncertainty in the world, any growth is a decent outcome.' Australia is not in a technical recession, where GDP contracts for two consecutive quarters, but the latest figures reflect an entrenched malaise in the economy. The 1.3 per cent annual growth pace is well below the long-run average of three per cent, despite Australia pump priming the economy with rapid population growth to drive economic activity and consumer spending. 'This risk has been exacerbated by global uncertainties relating to US trade policy which has weighed on confidence and the willingness to invest and spend,' Mr Bustamante said. 'Without a material pick-up in private demand the economy could be set for a period of subdued growth.' Oxford Economics lead economist Ben Udy said weak economic activity could see the Reserve Bank cut interest rates again on July 8, even though June quarter inflation data isn't due for release until the end of next month. 'The RBA will be watching closely for further signs that the weakness in activity – if that evidence continues to rack up, the RBA may opt to cut rates again in July, a little sooner than our current forecasts suggest,' he said. The futures market sees the Reserve Bank cutting interest rates three more times, from an existing level of 3.85 per cent, following relief in May, to 3.1 per cent by the end of 2025. This would take the cash rate back to where it was in February 2023, following eight interest rate rises in 2022. 'The economy needs much more monetary easing, especially now the threat of inflation is easing and the Trump Administration's initial policy impact on the global economy has not even fully shown up in the economic data,' Ms Murphy said. 'Had the Reserve Bank been able to observe the softness of the economy and the fall in inflation in the March quarter, it is likely the interest rate cutting cycle would have started sooner.' Australia's weaker economic activity also coincided with state governments scaling back their spending, with Queensland's $1,000 annual electricity rebates expiring at the end of June. This meant government spending was flat after nine consecutive quarters of growth. Household consumer spending was one of the few areas where spending grew, with the Australian Bureau of Statistics noting this occurred as a result of the federal government's $75 quarterly electricity rebates - adding up to $300 a year until the end of 2025. Essential spending rose 0.4 per cent, thanks to a 10.2 per cent increase in electricity, and gas expenditure 'from increased demand for electricity usage due to warmer than average summer conditions as well as reduced electricity bill relief payments to households'.
Sky News AU
28-05-2025
- Business
- Sky News AU
Consecutive interest rate cuts in doubt after new ABS data showed inflation steady at 2.4 per cent in year to April
Aussies hoping for back-to-back rate cuts may have their hopes dashed as fresh data showed inflation came in hotter than expected. New Australian Bureau of Statistics data showed headline inflation held steady at 2.4 per cent in the year to April while trimmed mean inflation – the middle 70 per cent of price changes that is central to the RBA's call – rose 0.1 per cent to 2.8 per cent. Inflation came in slightly above the market consensus of 2.3 per cent and money markets were pricing in a 60 per cent chance of a cut when the RBA next meets in July after the data was released. This is a fall from the 78 per cent chance factored in on Tuesday. EY's chief economist Cherelle Murphy said the RBA is likely to deliver two more rate cuts during this easing cycle as risks of inflation rising have eased, while economic uncertainty from the US-instigated trade war continues. 'The extent of the cuts will depend on how trade policy and geopolitical frictions impact the global economy and business investment and consumer decisions,' Ms Murphy said. 'We expect at least another two 25bp cuts this year, with possibly more over 2026.' Market analyst at eToro Josh Gilbert said the RBA remains cautious about inflation after delivering a cut last week. 'The RBA will be on watch and ... a rate cut in July is certainly not nailed on,' Mr Gilbert said. 'Last week's rate cut, in which the cash rate decreased to 3.85 per cent, doesn't necessarily set the stage for back-to-back cuts.' The uncertainty from Trump's trade war continues to weigh heavily on the future of the central bank's cash rate calls and the nation's economy. State Street Markets' head of APAC macro strategy Dwyfor Evans said the US trade war, along with Australia's unemployment rate that sits near historic lows, means the RBA will be particularly cautious with future calls. 'Given the continued uncertainty around tariffs, a strong jobs market and the base effects pressures in Q3, expect the RBA to maintain its cautious stance on prospective easing,' Mr Evans said. The cash rate now sits at 3.85 per cent after it was lowered last week for the second time this year. It was held at 4.35 per cent for almost a year and a half as the RBA stamped out post-pandemic inflation. The ABS' latest data showed food and non-alcoholic beverages inflation fell to 3.1 per cent from 3.4 per cent in March in a sign most groceries were dropping in price, according to the ABS' head of prices statistics Michelle Marquardt. 'While annual inflation eased for most food categories in April, egg prices were up by 18.6 per cent in the past 12 months," Ms Marquardt said. "This comes as supply has been affected by bird flu outbreaks.' Housing (up 2.2 per cent) was another large factor in the recent inflation data with rents rising five per cent over the year to April. This marked the lowest annual growth in rents since February 2023 as vacancy rates rise across most capital cities. Electricity prices fell 6.5 per cent in the year to April, compared to a 9.6 per cent fall in the 12 months to March. Power rebates played a significant role for the fall in electricity prices despite the impact of various state and federal concessions phasing out. 'Without all the Commonwealth and state government rebates, electricity prices would have risen 1.5 per cent in the 12 months to April,' Ms Marquardt said.
