RBA live: Interest rates announcement

3 weeks ago 15

Welcome to our live coverage of the May RBA announcement. We will keep you updated with the announcement and expert commentary from our economists.

Thank you for joining us

4:35pm

This concludes our coverage of the third Reserve Bank board decision on the cash rate for 2025.

Thank you for following along with our coverage of today’s 0.25% rate cut and keep an eye out for reaction coverage of this decision tomorrow.

Productivity growth a ‘universal’ concern

4:29pm

Governor Michele Bullock has said Australia is “not alone” when it comes to navigating productivity risk.

“There is a great deal of uncertainty about productivity,” she said.

“I can’t tell you what is going to turn it around. Most other countries are in the same position as us.

“I don’t know what the answer is, but productivity is up the top of the list of what the treasurer is working on.”

Bullock: Nothing the RBA can do about housing affordability

4:14pm

Housing affordability is a demand and supply issue that cannot be fixed by the Reserve Bank, governor Michele Bullock has said in today’s press conference.

“Increasingly this issue has been finding its way into both state and federal governments and that is where the focus has to be,” she said.

“This has been brewing for many years, but we have to focus on our inflation and employment mandate, which is a really good thing we can do for young people and renters.”

Labour market the major domestic risk

4:07pm

Governor Bullock has said the tight labour market in Australia is the most significant major risk within the domestic economy at the moment.

“Not everyone agrees with us on this, but that is our judgement,” she said.

“That indicates supply and demand have not really come back into balance, so there will still be inflationary risk.”

Bullock brushes productivity concerns away

3:59pm

The governor has responded to concerns raised that productivity is at a 60-year low in Australia, confirming it is less of a concern than unstable inflation.

“If we want to see wages increasing, it does make it harder for wage rises if productivity isn’t improving,” she acknowledged.

“It is very important and I’m happy the treasurer has identified it as one of the government’s key priorities.”

Recession possible in the next two years

3:52pm

Governor Michele Bullock has said scenario analysis by the RBA suggests Australia could face a recession within the next two years.

Responding to media questions, Ms Bullock said:

“That is in the very extreme circumstance. At the moment, we aren’t looking at that, but we need to be alert.”

‘New set of challenges facing the economy’

3:43pm

RBA governor Michele Bullock has begun her press conference by saying US tariffs bring “a new set of challenges” to the Australian economy now that inflation is back under control.

“Trade policies could lead to supply chain issues, which could raise prices for some imports, much like we saw in the pandemic," she said.

"We will need to be alert to upside risks. The board remains prepared to take further action if required."

Inflation expected to remain in 2-3% target

3:15pm

Inflation risks in the Australian economy have “become more balanced” according to the RBA’s statement – a key factor that determined the possibility for today’s cut.

“The board judged that an easing in monetary policy at this meeting was appropriate,” the statement read.

“Upside risks appear to have diminished.”

RBA very uncertain on global outlook

2:54pm

The Reserve Bank has issued a cautious statement alongside today’s rate cut, flagging “considerable uncertainty” around tariffs.

“Geopolitical uncertainties also remain pronounced,” the statement read.

“These developments are expected to have an adverse effect on global economic activity, particularly if households and firms delay expenditure pending greater clarity on the outlook.”

Governor Michele Bullock to speak imminently

2:46pm

The conclusion of today’s monetary policy meeting will be followed by governor Michele Bullock’s usual address to the media.

The press conference will take place at 3:30pm and will see Ms Bullock share the board’s decision-making process as well as its economic outlook.

Cash rate cut to 3.85%

2:30pm

The RBA board has confirmed the cash rate will be cut to 3.85% in a move that was largely expected by markets and economists.

Today's 0.25% cut means the cash rate is now 0.5% lower than it was 12 months ago and the same as it was in May 2023.

Economist predicts a cut of 0.25%

1:47pm

Pricing in the market implies a very high chance of a 25-basis point (bp) cut this afternoon, according to REA Group executive manager of economics, Angus Moore.

“Given underlying inflation is now back inside the RBA's target band, albeit only just, I'd be surprised if the RBA wasn't looking to cut,” he said.

“While market pricing has suggested some chance of a 50 bp cut, that's looking less likely now.”

Concerns around tariff pressures

1:32pm

Australia’s economic position could be very easily and drastically compromised if a trade war between China and the US kicks off.

The temporary pause of US tariffs on China announced last week is a positive sign for trade tensions, though this is still a temporary measure.

Australia’s rate cut expectations for the year are likely to cool if pressures re-emerge.

Another record high month for home prices

1:17pm

Home prices across Australia reached another record high in April, though the rate of growth was slower than in the first three months of the year.

If we see more rate cuts from the RBA, as anticipated, we could see the speed of price growth pick up once again.

The average price of a home in Australia is currently $805,000.

Latest big bank predictions

1:01pm

NAB has forecasted both a double rate cut today as well as three more cuts by December.

Westpac is anticipating a cut today, as well as in August and November, with ANZ also predicting three more cuts this year.

Commonwealth Bank – Australia’s largest lender – is forecasting one rate cut per quarter for 2025.

Double rate cut rumours

12:46pm

Talk of an 0.50% rate cut has been rife ever since the last board meeting, thanks in large part to comments first made by treasurer Jim Chalmers in the lead up to the election.

National Australia Bank (NAB) is the only major bank predicting a double rate cut for today, with chief economist Sally Auld saying the RBA needs to quickly take its policy to a more neutral stance.