Sign RBA will cut interest rates hidden in federal budget: ‘Six months faster’

 


Federal Budget Hints at Sooner RBA Rate Cuts: Relief Could Arrive by Mid-Year

Australian homeowners may be in for some welcome news sooner than expected. The latest Federal Budget includes a forecast that inflation will return to the Reserve Bank of Australia's (RBA) target range of 2–3% by mid-2025 — six months earlier than previously predicted.

This revision could signal earlier interest rate cuts, with some economists now anticipating a rate reduction from the RBA as soon as May.

Inflation Falling Faster Than Expected

Treasurer Jim Chalmers expressed confidence that Australia has “turned the corner” in the fight against inflation. He noted that the worst of the economic pressure appears to be behind us, with inflation now projected to reach target levels earlier than anticipated.

“We are emerging from a global inflation spike in better shape than most advanced economies,” Chalmers said. “Treasury now expects inflation to be sustainably back in the band six months earlier than anticipated.”

Headline inflation is now forecast to be 2.5% by June, down 0.25 percentage points from the previous forecast made in December. Importantly, underlying inflation — which excludes volatile elements like fuel and energy rebates — is also expected to return to target range by mid-year.

Stronger Economic Outlook

The broader economic outlook has also improved. Treasury forecasts GDP growth of 1.5% this year, rising to 2.5% in 2026 and 2027. The jobs market remains resilient, with unemployment now expected to peak at 4.25%, rather than the previously forecast 4.5%.

“This makes a soft landing more likely,” Chalmers added — referring to a scenario where inflation falls without triggering a sharp economic slowdown.

What This Means for Interest Rates

All eyes are now on the RBA’s next meeting, scheduled for Tuesday. While major banks are not expecting a rate cut just yet — with market odds currently placing only an 8% chance — there is growing consensus that cuts could begin in May.

CBA, NAB, and Westpac are all forecasting rate cuts by mid-year, while ANZ expects a single cut later in August. AMP chief economist Shane Oliver agrees with a May rate cut, despite cost-of-living measures in the budget adding complexity to the RBA’s task.

These measures include:

  • An additional $150 energy bill rebate

  • Two surprise income tax cuts

  • Reduced prices on essential medicines

While these initiatives will help households manage expenses, Oliver notes that rising government spending could slow the pace of underlying inflation falling — a key metric the RBA monitors closely.

“The cost-of-living measures keep headline inflation lower, but the RBA will focus on underlying inflation,” he said. “That said, we still expect more rate cuts this year.”

Banks Already Moving on Rates

Some banks are already adjusting in anticipation. ANZ and Macquarie have cut fixed home loan rates, and several major banks are also adjusting term deposit and savings account interest rates ahead of the RBA’s next move.

RBA Governor Michele Bullock has reiterated that any future rate cuts will depend on inflation not only returning to target but remaining there consistently.

“We think we’ll be back in the band this year,” Bullock said after February’s 0.25% rate cut, which brought the cash rate down to 4.1%. “But again, it’s not enough to be just back. You’ve got to be thinking you’re going to be sustainably there.”

What to Watch

The next RBA decision and upcoming inflation data will be critical in shaping what happens next. At Loans AU, we’re monitoring every move closely so we can help our clients make informed decisions about refinancing, home loans, and property investments.

Need help reviewing your current mortgage or want to understand how these changes could impact your repayments? Contact our team today — we’re here to help you stay ahead of the curve.

#LoansAU #InterestRates #RBADecision #MortgageAustralia #SydneyMortgageBroker #FederalBudget2025 #InflationAustralia #RateCut #HomeLoanAdvice #PropertyMarketAustralia #FinanceNews #Refinancing #MortgageTips #AussieEconomy #RBAUpdate

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