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The Guardian
3 days ago
- Business
- The Guardian
RBA ready to use rapid-fire rate cuts if Trump policies rattle Australia's economy, minutes reveal
The Reserve Bank of Australia is prepared to 'respond decisively' to any deterioration in the global economy, paving the way for rapid-fire cash rate cuts if Donald Trump's tariffs spark further market upheaval. The 20 May RBA meeting minutes, released on Tuesday, show the rate-setting board discussed implementing a bumper 50 basis point cut last month. But they decided such a move was not yet warranted because there were no immediate signs the economy had been significantly affected by the US trade policy. The RBA decided on a quarter point cut instead, amid falling inflation and weak household consumption. Sign up for Guardian Australia's breaking news email 'A 25 basis point reduction would ensure that monetary policy settings remained predictable at a time of heightened uncertainty, given market expectations,' the minutes said. 'And it would leave the board well-placed to respond as needed as the economy evolved.' The RBA noted it would 'respond decisively to international developments if they were to have material implications for activity and inflation' in Australia. In that scenario, the RBA would cut rates faster than currently forecast to support the Australian economy. The May minutes will inflate the hopes of mortgage holders of another near-term reprieve in lending rates. This marks a stark change in tone from RBA meetings earlier this year when the central bank warned against expectations of further cuts. While more rate cuts will be welcomed by indebted mortgage holders, a reduction in borrowing rates threatens to fuel another surge in house prices, making property even more unaffordable for prospective buyers. The RBA governor, Michele Bullock, acknowledged last month that falling borrowing rates could drive property prices higher, but said the onus was on federal and state governments to resolve housing shortages. Sign up to Breaking News Australia Get the most important news as it breaks after newsletter promotion Economists viewed the May rate cut as a shift back towards a neutral rate setting that neither ignites nor constrains the economy after a prolonged period of elevated borrowing costs. After the May meeting, Australia recorded a slightly hotter-than-expected underlying inflation reading. While this could temper calls for a rate cut at the next meeting in early July, the market is pricing in a near 80% chance of a 25 basis point cut to 3.6%. The falling cost of home loans has already driven house prices up across every capital city, according to Matthew Hassan, a senior economist at Westpac. 'The RBA's latest rate cut [is] adding clear impetus,' Hassan said. 'Prices are now up 1.7% since the RBA began easing interest rates in February.' Nearly 3,000 homes went to auction in the last week of May, the second highest figure for 2025, according to property analytics firm Cotality. Surging momentum pushed the auction clearance rate to 65.1% the week before that, the highest since July 2024. Further rate cuts will see buyers force up national home prices at a faster rate than wages over 2025, analysts expect, despite persistent cost-of-living pressures on wages were raised 3.5% on Tuesday and the Reserve Bank expects national wage growth will sit at just 3.3% by the end of 2025.
Reuters
28-05-2025
- Business
- Reuters
New Zealand central bank cuts cash rate by 25 bps
WELLINGTON, May 28 (Reuters) - New Zealand's central bank cut its benchmark official cash rate by 25 basis points to 3.25% on Wednesday, as policymakers sought to revive a struggling economy and buffer it from the impact of global trade disruptions. The decision was in line with a Reuters poll where all but one of the 30 economists surveyed forecast the Reserve Bank of New Zealand would cut the cash rate (NZINTR=ECI), opens new tab for the sixth successive meeting. The central bank has slashed rates by 225 basis points since August, with lower inflation giving policymakers leeway to lower borrowing costs as the economy faces fresh global risks from U.S. President Donald Trump's international trade war.
Daily Mail
20-05-2025
- Business
- Daily Mail
Barefoot Investor Scott Pape unleashes at the Reserve Bank for lowering interest rates
The Barefoot Investor has taken a swipe at the Reserve Bank of Australia, claiming young people should be 'p**sed off' the bank decided to cut the cash rate because it would cause house prices to surge. On Tuesday afternoon, the RBA eased the cash rate by 25 basis points to 3.85 per cent - a low which has not been seen since June 2023. Scott Pape said while the cash rate cut would alleviate mortgage repayments for millions of Aussies it would have a negative impact on young people trying to get into the property market. Mr Pape said young Aussies should be 'pissed' at the decision as it means property prices would inevitably increase. 'If I was a young person right now I would be pretty pissed off,' Mr Pape told 'Every time a young person gets close, it just keeps getting more expensive.' Mr Pape also took aim at the Albanese government for introducing a five per cent deposit scheme for first-home buyers,' labelling the policy as 'totally stupid'. Experts have warned the policy, which is set to come into effect from January 1, 2026, would ultimately push house prices up. 'People shouldn't be buying a home in one of the most expensive cities in the world if they can't afford it,' Mr Pape said. 'I don't understand how a responsible government can stand by and say this is a good thing.' SQM Research Managing Director Louis Christopher said he expects property prices to rise from now and into 2026, with a 10 per cent increase by the end of the year. Mr Christopher said auction clearance rates would skyrocket due to the rate cut and advised first-home buyers to try and enter the market before the end of 2025. 'First home buyers are in a better buying position compared to six months ago,' Mr Christopher said. 'Their purchasing and borrowing power has increased. However, if I am right about price rises, they will need to move quickly, otherwise they will be back to square one on affordability.' An owner-occupier borrower with an average $660,000 mortgage would save $107 on their monthly repayments with the latest rate cut, as typical variable home loan rates with the major banks fell under six per cent. ANZ became the first of the Big Four banks to announce it would match the RBA's latest rate cut with a 25 basis point cut to its variable rates. This means its online-only rate is falling to 5.59 per cent on May 30. Westpac followed seven minutes later, matching ANZ's equally lowest online-only mortgage rate but from June 3. The Commonwealth Bank matched its competitors shortly after, with borrowers getting relief on May 30. Australia's biggest home lender updated its forecasts to have more rate cuts in August and November, with relief at the RBA's next meeting in July a 'live' possibility. NAB's lowest online-only rate is falling to 5.94 per cent on May 30, but it's available for borrowers with a small five per cent deposit. Ms Bullock acknowledged the 13 rate rises in 2022 and 2023 were challenging for borrowers, who copped the most aggressive pace of monetary policy tightening since the late 1980s. 'I know this period of relatively high interest rates has been and continues to be challenging for many households and businesses but it was essential that we brought inflation down,' Ms Bullock said. The RBA declined to suggest more rate cuts were coming but left the door open for further relief as inflation is expected to fall into the target band. 'Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance,' RBA said.
News.com.au
20-05-2025
- Business
- News.com.au
‘Pissed': Great Australian Dream dashed as housing prices set to soar amid rates cut
Young Aussies doing away with the smashed avocado and scraping together pennies for their first home should be 'pissed off' by the Reverse Bank's decision to cut the cash rate again. That's the message from experts who agree that house prices could rise by up to 10 per cent in the coming months as a result of the decision. The RBA decided to cut the cash rate on Tuesday afternoon by 25 basis points to 3.85 per cent, providing much-needed relief to homeowners. The widely anticipated move was the second reduction of the year for the cash rate, now at its lowest since May 2023. However, SQM Research managing director Louis Christopher said the rate cut would send auction clearance rates soaring, predicting property prices to rise 10 per cent by the end of the calendar year. Mr Christopher said first-home buyers needed to get in before the back end of 2025. 'It is very likely housing prices will rise from here and continue into 2026,' Mr Christopher said. 'From today's rate cut and the one in March, first home buyers are in a better buying position compared to six months ago. 'Their purchasing and borrowing power has increased. However, if I am right about price rises, they will need to move quickly, otherwise they will be back to square one on affordability.' Barefoot investor Scott Pape said that while the rate cut would help those trying to pay off their mortgage, it would also see more of the 'wrong people' get into the housing market. 'If I was a young person right now I would be pretty pissed off,' Mr Pape told 'Every time a young person gets close, it just keeps getting more expensive.' Mr Pape also slammed the Albanese government's five per cent deposit scheme – which will come in from January 1 next year – saying it would do 'a lot of damage'. 'It's stupid, totally stupid,' Mr Pape said. 'People shouldn't be buying a home in one of the most expensive cities in the world if they can't afford it. 'I don't understand how a responsible government can stand by and say this is a good thing.' The second rate cut came after inflation data released late last month showed the all-important trimmed mean inflation, which came in at 2.9 per cent for the March quarter, down from 3.3 per cent in the December quarter. It was the lowest annual inflation rate since December 2021 and fell back within the RBA's 2 to 3 per cent target range. The RBA has left the door open for further rate cuts, saying the outlook for inflation is that it would sustainably fall into the target band. 'Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance,' the board said.
Daily Telegraph
20-05-2025
- Business
- Daily Telegraph
Nerida Conisbee: Modest cut for now as global turmoil continues
Good news for mortgage holders as the Reserve Bank of Australia cut the cash rate today by 0.25 per cent. While the cut will be welcomed by many, it has been driven primarily by continued global uncertainty brought about by the election of Trump in the US. While extremely high tariffs put on US businesses and consumers will primarily impact local residents in that country, the impact on China specifically has the potential to impact Australia's economic growth. In addition, while Australia is not a major trading partner with the US, supply chain disruptions and the potential for global pricing by US companies is likely to impact our inflation rate. This could be offset somewhat by lower prices for products out of China however the extent to which this happens is highly uncertain. RELATED Rate cuts to drive up prices by $87k '$7.7b cost': Why stubborn Aussies could lose fortune Is Trump driving Aus house price growth? Housing market already showing strong momentum The cut comes at a time when Australia's housing market is already demonstrating remarkable resilience. April data confirmed the acceleration of price growth that began in January, with house prices nationally rising by 0.4 per cent to reach a median of $917,433, representing an annual growth of 5.2 per cent. The unit market showed even stronger monthly momentum with prices increasing by 0.5 per cent to $685,637, delivering a yearly growth rate of 4.6 per cent. This widespread acceleration suggests we're entering a new phase in the market cycle, with 13 out of 14 regions showing accelerating growth when comparing recent three-month periods. Unemployment concerns on the horizon The global economic slowdown triggered by US-China trade tensions raises the spectre of rising unemployment in Australia. As export demand potentially weakens and businesses face supply chain disruptions, job security could deteriorate across several sectors. However, history suggests the housing market demonstrates surprising resilience in the face of unemployment challenges. During previous economic downturns, including the GFC and Covid-19 pandemic, property prices showed remarkable stability compared to other asset classes, particularly in metropolitan areas. This counterintuitive resilience can be attributed to several factors: interest rate cuts typically accompany rising unemployment, offsetting affordability challenges; mortgage holders prioritise housing payments over other expenses; and property is viewed as a safe haven during economic uncertainty. While unemployment pressure may create headwinds, it's unlikely to derail the current momentum in Australia's housing market. Interest rate cut to fuel further price growth Today's modest 0.25 per cent cut will still direct additional money into the housing market, providing borrowers with increased capacity. For a household with a $750,000 mortgage, this cut represents savings of approximately $115 per month. Markets are now pricing in additional cuts through the remainder of the year, which will continue to support price growth. The impact will be particularly pronounced in markets that have already shown strong momentum, including Perth, Adelaide and Brisbane, where annual growth rates have reached 12.2 per cent, 7.8 per cent and 7.3 per cent respectively. However markets that are currently much slower, such as Sydney and Melbourne have historically been far more sensitive to rate cuts. The cuts today are likely to boost these markets. Labor buyer-friendly policies adding additional fuel The recent Labor victory in the federal election adds another dimension to Australia's accelerating housing market. Labor's comprehensive housing package, particularly the expansion of the five per cent deposit scheme to all first home buyers regardless of income. This fundamental shift in housing accessibility will create additional demand pressure in a market already benefiting from interest rate reductions. By removing the substantial barrier of lenders' mortgage insurance and the need for a 20 per cent deposit, more buyers will be able to enter the market simultaneously, competing for existing housing stock. Safe haven in uncertain times The combination of interest rate cuts, Labor's buyer-friendly policies, and global economic uncertainty creates a perfect environment for accelerated price growth across Australia's property markets. As financial markets worldwide experience turbulence from Trump's 'Liberation Day' tariffs, residential property offers distinct advantages: Greater price stability compared to share markets, tangible asset security with intrinsic utility value, immediate benefits from today's interest rate cut and supply constraints supporting existing property values. While today's rate cut provides immediate relief for mortgage holders, its impact on property prices will likely contribute to accelerating growth for the remainder of 2025. – This column was supplied by Ray White Group Chief Economist, Nerida Conisbee
