Reserve Bank of Australia Set to Cut Interest Rates Again as Economy Slows
The Reserve Bank of Australia is expected to cut interest rates for the third time this year, with most economists predicting a 25 basis point reduction at its meeting on July 8. Falling inflation and weaker-than-expected growth have pushed the Central Bank of Australia towards a more aggressive easing path.
Back in May, economists expected three cuts in 2025. That number has now grown to five as consumer spending continues to disappoint and inflation slows faster than forecast.
Slower Growth and Softer Spending are Driving a Policy Shift
Australia’s economy grew just 0.2% in the first quarter of 2025, down from 0.6% in the previous quarter. At the same time, consumption has not kept pace with expectations, which has brought down the overall momentum. Many economists believe this trend has forced the central bank to make more decisive decisions.
“The post-COVID inflation surge is pretty much out of the economy now,” said Deutsche Bank’s chief economist for Australia, Philip O’Donaghoe. “The RBA’s task is now to support growth and keep the job market steady.”
Westpac’s Luci Ellis said, “Much of RBA’s current rate path is due to weaker household consumption than it had projected earlier in the year.”
Global Trade Risks Could Add More Pressure
Adding to these domestic concerns are global risks, especially with the potential fallout from US President Donald Trump’s tariffs. With a 90-day pause on the new tariff ending on July 9, economists warn that the uncertainty over trade could hurt Australian exports and dent customer confidence further.
Inflation is forecast to stay within another RBA’s 2-3% range, averaging 2.6% in 2025, and 2.7% in 2026. Still, many believe that the central bank of Australia will not wait long to provide supportive conditions to weaken.
Stay informed. Stay inspired. Subscribe to Inspirepreneur Magazine’s Newsletter for the latest developments on global conflicts, leadership insights, and strategic innovations shaping tomorrow’s world.
