May 21, 2025 • 17 mins
The Reserve Bank of Australia this week cut rates by 25 basis points, for the second time this year, while pulling off a post-Covid economic crisis soft landing for the local economy that few central banks have been able to execute.
This week on the podcast, Rebecca Jones speaks to Bloomberg Economics’ James McIntyre about the outlook for interest rates, how that could be affected by Trump’s tariff war, and what it all means for the housing market.
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Speaker 1 (00:01):
Three point eighty five.
Speaker 2 (00:02):
There, it is there, it is so a twenty five
basis point cut.
Speaker 1 (00:06):
This was widely expected.
Speaker 2 (00:07):
The market had a ninety nine percent chance of this
priced in.
Speaker 1 (00:12):
They're saying still that maintaining low and stable inflation is
their priority. Well as expected, the Reserve Bank of Australia
has lowered interest rates. The question now is how far
and how fast will our central bank go? Hello and
welcome to the Bloomberg Australia Podcast. I'm Rebecca Jones. Through
(00:34):
the post COVID cost of living crisis, Australia's Central Bank
took a gentler approach than its global peers to raining
in inflation, managing to keep the economy close to full
employment throughout a rare feat that sparked debate about its
viability as a model to tackle future crises. But now
(00:55):
with inflation back in the target zone, the RBA on
Tuesday reduced its key rate by a quarter of a
percentage point for a second time in the current easing cycle,
to three point eighty five percent. Now, for those who
have a mortgage that's on a variable rate, that is
indeed good news. But what for the rest of us.
(01:15):
Bloomberg's economist James MacIntyre joins me today to try and
answer this question. James, it's always great to have you here. Now,
it's been a bit of a mixed economic bag of
data in the lead up to this recent meeting. Can
you talk us through the key things that would have
been weighed up in the RBA boardroom this week?
Speaker 3 (01:36):
Yeah?
Speaker 2 (01:36):
Thanks Beck. So well, the RBA does a comprehensive sweep,
as you'd expect any central bank does of the data
and the economy. But the key things would have been
coming through, all the key things that at least you
know markets and we've been talking about in the lead
up was how strong the labor market continues to be surprising,
how resilient this job's market is here in Australia. That
(01:57):
and the CPI data, we thought it was stronger than
ext but when you look at it, actually it was
in line with what the RBA was projecting back in February,
so they would give themselves a tick there. And then
the other piece of data that was out that was
interesting was the wages data and that was a little
bit strong. Now when we look at it, it actually
was driven by and the RBA pointed this out as well.
(02:21):
It was driven by a couple of public sector wage agreements,
but behind that the private sector wages, the actual market
side of the economy, the path that the RBA is
actually influencing, that was continued to ease off and go
the way they wanted. So they weren't just looking at
the headlines. They're looking behind it to see if they're
getting the trends that they want to see in the economy.
(02:41):
And it looks like, based on their decision, they got
what they were after.
Speaker 1 (02:45):
And is this what's ultimately led James to what some
are calling a dubvish cut when the opposite, a hawkish cut,
was what was expected. And I'll just pause there and
explain for the non bird watches among us. In the
contact to financial policy, hawks and doves are terms used
to describe different attitudes towards monetary policy. Hawks are the
(03:08):
ones that generally favor a tighter monetary policy, often advocating
for higher interest rates to control inflation and the like,
whereas doves prefer looser monetary policy.
Speaker 2 (03:19):
That's it. We had expected this to be a bit
of a hawkish cut, and that's because we would have
we would have thought that the RBA would still be
very much, very cautious and mindful of the inflation side
of its of its mandate. Inflation has come down, but
when we look at how strong the labor market is
and that little bit of perkier wage growth than we
(03:43):
might have been been expecting. The RBA did dive into
the reasons for it, as did we, but nonetheless, you know,
the general tone was one of we think inflation, we're
on the right side of it, but we want to
just be very careful and measured as we go forward.
That would be something that we The RBA is still
emphasizing a focus on inflation, whereas if you were to
(04:04):
become a bit more dubbish, which they ended up doing
in this statement, we can really see that. Actually in
their commentary, the Reserve Bank said that the risks to
inflation have become more balanced, and that they see that
some of the upside risks that they had been worried
about around inflation and also the economy being a little
bit stronger than they might have expected, have really pulled
(04:26):
away and diminished thanks to the US global trade war,
and so they've come we've seen this shift, I guess
in a sense for being hawkish and really worried about
inflation to now starting to be a little bit more
dubbish and worried about growth and the labor market now
going in the labor market figures hadn't said that, but
when it's the commentary that we get from say the
(04:46):
RBA's Business Liaison about business uncertainty, how their forecasts have
shifted as they're thinking about the US tariff impacts, not
only not so much on Australia because they're quite small,
but more broadly on our major trading partners. They have
taken that sort of pivot I guess, to being a
little bit more worried about growth. And that's where we
would say that, Okay, well they're a bit more dervish,
(05:09):
and that tells us that there's more cuts to come.
Speaker 1 (05:12):
I want to pick up a little bit on something
you just mentioned there. Now. Donald Trump's actions are causing
uncertainty all over the world, and tariffs are something that
Michelle Bullerck mentioned at the press conference after the decision
on Tuesday. James based on her comments, how heavily did
Trump's trade walk weigh on this week's decision or on
(05:34):
balance domestic factors like Anthony Albanezi is surprisingly big election
win outweigh what's going on abroad.
Speaker 2 (05:43):
Yeah, well, there's always a balance that goes into these things.
And also it's the balance as it exists at any
particular point in time. And so if the RBA might
have had their meeting immediately after or very soon after
the election, but before the UN and China struck a
deal and there was still a maximum degree of uncertainty
(06:04):
of around trade and markets might have been suffering quite
a bit, they might have gone the way that they
might have opted for the decision that they talked about,
with a fifty basis point cut. So it does matter.
But what Bullok did tell us is that the economy
domestically on its own was enough for a cut. The
Trump and Taraft situation was potentially enough that it could
(06:28):
have gotten them over the line to a larger cut.
But thanks to the truce, and thanks to a little
bit of the confidence reemerging on markets at least, that
we might not see some of the more extreme outcomes
on the trade. At the moment, we've got a wait
till the end of those ninety days to find out
really what's what, And it.
Speaker 1 (06:49):
Is very much a game of what's known in what's
not known, right, because we do know the dates of
these RBA announcements, that's locked in. That's a certainty what
we and we did know the date of the federal
election that we've just had. But other things are less
easy to control, shall we say, James, let's take a
quick listen now to Governor Michelle Bullock. She had some
(07:12):
interesting comments at the press conference on Tuesday around consumers.
Let's have a quick listen.
Speaker 3 (07:19):
We actually have rate cuts incorporated into our forecast. So
what we have in our forecast is a pickup in consumption,
and that's a pride to the fact that household disposable
incomes real household disposable incomes a rising and that reflects
not only the fact that wages are our rising and
inflation is much lower, but also the fact that interest
(07:41):
rates are falling. So yes, we would expect consumption to
be picking up, is picking up a little bit slower
than we thought. Households are being a little bit cautious.
Speaker 1 (07:50):
So, James, those comments are a bit different to what
she was saying after the April rates decision, right, especially
around the consumer centim As we heard there, what do
you make of this.
Speaker 2 (08:04):
My view on this is and if I look back
not just to April, but even before to February, and
even as we go back to the end of the year,
when we think about how the RBA has been thinking
about the economy, twenty twenty five is a year where
growth is picking up after a very lackluster twenty twenty four.
But one of the key drivers of that pickup has
been a recovery and consumer spending and so but what
(08:27):
we've seen though, is that we've got the first quarter
of data through retail sales, of retail trade and then
household spending, and it's not looking all that as strong
as we might have thought. Now it's too early for
the February rate cut to really have had a big impact,
but we're seeing a few things there where the RBA
(08:47):
has been dialing back their consumer spending forecasts. Now a
little bit less population growth than they'd had three months ago. Fine,
but that spending isn't there in the economy. Confidence has
been hit by the trade and tariff uncertainty, and that's
one of the channels that this can flow through. So
if we're not if the RBA is a little bit
(09:08):
worried about consumers not opening in their wallets as much
as they might have hoped. Then then that tells you
that there's a little bit less shakier confidence in the
economic outlook for the RBA, and that's something that will
probably lead them to be a little bit more responsive
on rates.
Speaker 1 (09:27):
So, as of now, the market is pricing in three
rate cuts by the end of this year, James, what
impact would you expect that to have on the country's
housing crisis?
Speaker 2 (09:38):
Price is just.
Speaker 1 (09:39):
Going to keep going up and up.
Speaker 2 (09:42):
Well, three rate cuts on top of the two that
we've already had. If that's if markets are right, and
that's where the RBA ends the year, then that would
be one point two five percentage points a full quite
a large amount of cuts over the course over the
course of a short period of time. And that's that's
going to feed into what people can borrow. And yes,
(10:03):
that means that people will go out there with more
buying power the same amount of homes. We are boosting supply,
but not fast enough. More buying power, same amount of homes.
It's a fairly simple equation that prices will continue to
rise and it will get worse. And what we will
see is that those are markets where it's been quite
(10:23):
challenging for affordability Sydney, in Melbourne where buyers had been
kind of capped out and price growth hadn't been as strong.
They might be ones that benefit early on as people
can afford to borrow more and with larger tickets, but
eventually we will continue to see that spill over into
(10:45):
the other more affordable capitals like Earth Adelaide, Brisbane, and
we will see the strong growth that's continued there perhaps
getting a little bit of a towel wind as the
RBA continues to deliver those cuts. It's just an unfortunate
reality of trying to support the whole economy that as
we reduce the cost of borrowing, that means that people
can borrow more and they will go and bid those
(11:07):
things up. But that's the trade off we have for
trying to make sure that that consumer spending stay a strong,
business investment picks up and we buffer the overall economy
from some of the shocks coming from offshore.
Speaker 1 (11:19):
And Michelle Bulloks often said that she has and the
RBA has just a one instrument. You are saying, they're
James though that gen Z and hey, millennials, older people
who haven't been able to get into the property market
here in Australia are going to find it even harder
as the cuts come in if they don't time it correctly.
(11:39):
Let's take us now to a quick break and when
we come back, we'll whip out the crystal ball with
my guest, Bloomberg's economist James McIntyre, to see what the
next six months has in store. You're listening to the
Bloomberg Australia Podcast and welcome back to the Bloomberg Australia Podcast.
(12:00):
You're here with me Rebecca Jones, and I'm with Bloomberg
Economics as James McIntyre. We're conducting an autopsy of sorts
on the latest decision from the RBA to cut interest rates.
Nobody paus over every word spoken by the Governor Michelle Bullock.
Then you, James, So tell me when the board meets next,
which is going to be in July. What are they
(12:23):
going to be looking for between now and then that's
going to help them make their decision.
Speaker 2 (12:30):
Well, the key ones are going domestically are going to
be the labor market and inflation. We've got some GDP
data coming out as well, but we pretty much know
from a lot of the real time tracking around how
things are going, especially around the consumer, which is a
key focal point for the RBA. But it's really going
to be about is that labor market still holding up
(12:51):
strong and or how much slack is emerging in the
labor market, and what's going on with inflation. We'll only
have one of the monthly indicators for May, so we
won't have the full quarterly suite. We'll have to wait
for the August meeting for that. But those are the
key domestic things now. When it comes, however, confidence could
(13:12):
be hit and buffeted, either confidence in terms of the
share market and any wealth effects or impacts from that,
or business and consumer confidence could be derailed by whatever
we see coming from offshore. So it's not just the
domestic story that the RBA is going to be worried about.
If we think about the China US truce being something
(13:33):
that kept a fifty basis point cut off the table,
if there's an eruption, if there's that truce is crumbles
and that there is an eruption of concern around trade,
or maybe it might be the bond markets melting down
over the US fiscal position over the next couple of weeks,
you know, that could be something that could tip the
(13:55):
RBA over into delivering a further cut in July. Our
forecast had been for the year that the RBA would
be delivering it early another two this year markets are
there at three, and that those two rate cuts would
be delivered gradually and slowly and dribbled out over time
in August and November. But if there is this shock,
if there is more uncertainty, and that uncertainty corrodes business
(14:18):
and consumer confidence, then we'd expect that the RBA might
be prepared to step up and deliver another cut in July.
Speaker 1 (14:28):
So to recap, it was nice of the RBA this
month to show its willing to cut and to reveal
a bit more about their thought process. These decisions aren't
mutually exclusive. The RBA doesn't exist in a bubble outside
of the forces that are occurring in geopolitics and other
(14:48):
economies around the world. We still don't know how fast
or how far they're going to go in terms of
rate cuts. But the language to your to your view, James,
is that the RBA is poised and alert to these happenings,
and if things do take a nasty turn. They're going
(15:10):
to be right there in the game trying to minimize
the damage. Let's try not to end on a downer,
which often happens when we're talking together about the economy.
I understand this, James, looking at your crystal ball, What
are you predicting is going to happen at this next
meeting in July?
Speaker 2 (15:29):
Cut a hold? Well, yeah, Well, the crystal ball, or
the optimistic view, is that we don't have these big
disruptions and that the things continue to tick over the economy,
and that means the RBA can hold so and deliver
that next rate cut when they do their full assessment
in August. So the positive view on the economy is
(15:51):
that growth can continues to tick along. The labor market
remains fairly well resilient. We've still got a four point
one percent unemployment rate, it's incredible, and that that continues
to move along. We get some improvement in residential housing supply. Yes,
you will get a little bit of a pickup in
house prices, but that the RBA is able to kind
(16:13):
of look through and go, well, we are still restrictive.
We do need to let the leash off the economy
to take our foot off the brakes, and doing that
is a slow gradual process. So hold in July with
cut in August. That's our base case. But if they
do look at things, and if they're seeing a pretty
(16:35):
ugly picture outside the rear view mirror that unfortunately they
have to look through, then then we could see them
step on that accelerator to try and give us the
best chance of weathering whatever storms the global economy throws
our way.
Speaker 1 (16:51):
James Becinta, thank you for joining me today. Thanks Beck,
and thank you for listening to the Bloomberg Australia podcast.
I'm Rebecca Joe. This episode was recorded on the traditional
lands of the world, Wondery and Gadigal People. It was
produced by Paul Allen and edited by Ainsley Chandler and
Chris Burke. Don't forget to follow and review the show
(17:12):
wherever you get your podcasts, and sign up for Bloomberg's
free daily newsletter, Australia Briefing. Go to Bloomberg dot com
to subscribe.
Three point eighty five.
Speaker 2 (00:02):
There, it is there, it is so a twenty five
basis point cut.
Speaker 1 (00:06):
This was widely expected.
Speaker 2 (00:07):
The market had a ninety nine percent chance of this
priced in.
Speaker 1 (00:12):
They're saying still that maintaining low and stable inflation is
their priority. Well as expected, the Reserve Bank of Australia
has lowered interest rates. The question now is how far
and how fast will our central bank go? Hello and
welcome to the Bloomberg Australia Podcast. I'm Rebecca Jones. Through
(00:34):
the post COVID cost of living crisis, Australia's Central Bank
took a gentler approach than its global peers to raining
in inflation, managing to keep the economy close to full
employment throughout a rare feat that sparked debate about its
viability as a model to tackle future crises. But now
(00:55):
with inflation back in the target zone, the RBA on
Tuesday reduced its key rate by a quarter of a
percentage point for a second time in the current easing cycle,
to three point eighty five percent. Now, for those who
have a mortgage that's on a variable rate, that is
indeed good news. But what for the rest of us.
(01:15):
Bloomberg's economist James MacIntyre joins me today to try and
answer this question. James, it's always great to have you here. Now,
it's been a bit of a mixed economic bag of
data in the lead up to this recent meeting. Can
you talk us through the key things that would have
been weighed up in the RBA boardroom this week?
Speaker 3 (01:36):
Yeah?
Speaker 2 (01:36):
Thanks Beck. So well, the RBA does a comprehensive sweep,
as you'd expect any central bank does of the data
and the economy. But the key things would have been
coming through, all the key things that at least you
know markets and we've been talking about in the lead
up was how strong the labor market continues to be surprising,
how resilient this job's market is here in Australia. That
(01:57):
and the CPI data, we thought it was stronger than
ext but when you look at it, actually it was
in line with what the RBA was projecting back in February,
so they would give themselves a tick there. And then
the other piece of data that was out that was
interesting was the wages data and that was a little
bit strong. Now when we look at it, it actually
was driven by and the RBA pointed this out as well.
(02:21):
It was driven by a couple of public sector wage agreements,
but behind that the private sector wages, the actual market
side of the economy, the path that the RBA is
actually influencing, that was continued to ease off and go
the way they wanted. So they weren't just looking at
the headlines. They're looking behind it to see if they're
getting the trends that they want to see in the economy.
(02:41):
And it looks like, based on their decision, they got
what they were after.
Speaker 1 (02:45):
And is this what's ultimately led James to what some
are calling a dubvish cut when the opposite, a hawkish cut,
was what was expected. And I'll just pause there and
explain for the non bird watches among us. In the
contact to financial policy, hawks and doves are terms used
to describe different attitudes towards monetary policy. Hawks are the
(03:08):
ones that generally favor a tighter monetary policy, often advocating
for higher interest rates to control inflation and the like,
whereas doves prefer looser monetary policy.
Speaker 2 (03:19):
That's it. We had expected this to be a bit
of a hawkish cut, and that's because we would have
we would have thought that the RBA would still be
very much, very cautious and mindful of the inflation side
of its of its mandate. Inflation has come down, but
when we look at how strong the labor market is
and that little bit of perkier wage growth than we
(03:43):
might have been been expecting. The RBA did dive into
the reasons for it, as did we, but nonetheless, you know,
the general tone was one of we think inflation, we're
on the right side of it, but we want to
just be very careful and measured as we go forward.
That would be something that we The RBA is still
emphasizing a focus on inflation, whereas if you were to
(04:04):
become a bit more dubbish, which they ended up doing
in this statement, we can really see that. Actually in
their commentary, the Reserve Bank said that the risks to
inflation have become more balanced, and that they see that
some of the upside risks that they had been worried
about around inflation and also the economy being a little
bit stronger than they might have expected, have really pulled
(04:26):
away and diminished thanks to the US global trade war,
and so they've come we've seen this shift, I guess
in a sense for being hawkish and really worried about
inflation to now starting to be a little bit more
dubbish and worried about growth and the labor market now
going in the labor market figures hadn't said that, but
when it's the commentary that we get from say the
(04:46):
RBA's Business Liaison about business uncertainty, how their forecasts have
shifted as they're thinking about the US tariff impacts, not
only not so much on Australia because they're quite small,
but more broadly on our major trading partners. They have
taken that sort of pivot I guess, to being a
little bit more worried about growth. And that's where we
would say that, Okay, well they're a bit more dervish,
(05:09):
and that tells us that there's more cuts to come.
Speaker 1 (05:12):
I want to pick up a little bit on something
you just mentioned there. Now. Donald Trump's actions are causing
uncertainty all over the world, and tariffs are something that
Michelle Bullerck mentioned at the press conference after the decision
on Tuesday. James based on her comments, how heavily did
Trump's trade walk weigh on this week's decision or on
(05:34):
balance domestic factors like Anthony Albanezi is surprisingly big election
win outweigh what's going on abroad.
Speaker 2 (05:43):
Yeah, well, there's always a balance that goes into these things.
And also it's the balance as it exists at any
particular point in time. And so if the RBA might
have had their meeting immediately after or very soon after
the election, but before the UN and China struck a
deal and there was still a maximum degree of uncertainty
(06:04):
of around trade and markets might have been suffering quite
a bit, they might have gone the way that they
might have opted for the decision that they talked about,
with a fifty basis point cut. So it does matter.
But what Bullok did tell us is that the economy
domestically on its own was enough for a cut. The
Trump and Taraft situation was potentially enough that it could
(06:28):
have gotten them over the line to a larger cut.
But thanks to the truce, and thanks to a little
bit of the confidence reemerging on markets at least, that
we might not see some of the more extreme outcomes
on the trade. At the moment, we've got a wait
till the end of those ninety days to find out
really what's what, And it.
Speaker 1 (06:49):
Is very much a game of what's known in what's
not known, right, because we do know the dates of
these RBA announcements, that's locked in. That's a certainty what
we and we did know the date of the federal
election that we've just had. But other things are less
easy to control, shall we say, James, let's take a
quick listen now to Governor Michelle Bullock. She had some
(07:12):
interesting comments at the press conference on Tuesday around consumers.
Let's have a quick listen.
Speaker 3 (07:19):
We actually have rate cuts incorporated into our forecast. So
what we have in our forecast is a pickup in consumption,
and that's a pride to the fact that household disposable
incomes real household disposable incomes a rising and that reflects
not only the fact that wages are our rising and
inflation is much lower, but also the fact that interest
(07:41):
rates are falling. So yes, we would expect consumption to
be picking up, is picking up a little bit slower
than we thought. Households are being a little bit cautious.
Speaker 1 (07:50):
So, James, those comments are a bit different to what
she was saying after the April rates decision, right, especially
around the consumer centim As we heard there, what do
you make of this.
Speaker 2 (08:04):
My view on this is and if I look back
not just to April, but even before to February, and
even as we go back to the end of the year,
when we think about how the RBA has been thinking
about the economy, twenty twenty five is a year where
growth is picking up after a very lackluster twenty twenty four.
But one of the key drivers of that pickup has
been a recovery and consumer spending and so but what
(08:27):
we've seen though, is that we've got the first quarter
of data through retail sales, of retail trade and then
household spending, and it's not looking all that as strong
as we might have thought. Now it's too early for
the February rate cut to really have had a big impact,
but we're seeing a few things there where the RBA
(08:47):
has been dialing back their consumer spending forecasts. Now a
little bit less population growth than they'd had three months ago. Fine,
but that spending isn't there in the economy. Confidence has
been hit by the trade and tariff uncertainty, and that's
one of the channels that this can flow through. So
if we're not if the RBA is a little bit
(09:08):
worried about consumers not opening in their wallets as much
as they might have hoped. Then then that tells you
that there's a little bit less shakier confidence in the
economic outlook for the RBA, and that's something that will
probably lead them to be a little bit more responsive
on rates.
Speaker 1 (09:27):
So, as of now, the market is pricing in three
rate cuts by the end of this year, James, what
impact would you expect that to have on the country's
housing crisis?
Speaker 2 (09:38):
Price is just.
Speaker 1 (09:39):
Going to keep going up and up.
Speaker 2 (09:42):
Well, three rate cuts on top of the two that
we've already had. If that's if markets are right, and
that's where the RBA ends the year, then that would
be one point two five percentage points a full quite
a large amount of cuts over the course over the
course of a short period of time. And that's that's
going to feed into what people can borrow. And yes,
(10:03):
that means that people will go out there with more
buying power the same amount of homes. We are boosting supply,
but not fast enough. More buying power, same amount of homes.
It's a fairly simple equation that prices will continue to
rise and it will get worse. And what we will
see is that those are markets where it's been quite
(10:23):
challenging for affordability Sydney, in Melbourne where buyers had been
kind of capped out and price growth hadn't been as strong.
They might be ones that benefit early on as people
can afford to borrow more and with larger tickets, but
eventually we will continue to see that spill over into
(10:45):
the other more affordable capitals like Earth Adelaide, Brisbane, and
we will see the strong growth that's continued there perhaps
getting a little bit of a towel wind as the
RBA continues to deliver those cuts. It's just an unfortunate
reality of trying to support the whole economy that as
we reduce the cost of borrowing, that means that people
can borrow more and they will go and bid those
(11:07):
things up. But that's the trade off we have for
trying to make sure that that consumer spending stay a strong,
business investment picks up and we buffer the overall economy
from some of the shocks coming from offshore.
Speaker 1 (11:19):
And Michelle Bulloks often said that she has and the
RBA has just a one instrument. You are saying, they're
James though that gen Z and hey, millennials, older people
who haven't been able to get into the property market
here in Australia are going to find it even harder
as the cuts come in if they don't time it correctly.
(11:39):
Let's take us now to a quick break and when
we come back, we'll whip out the crystal ball with
my guest, Bloomberg's economist James McIntyre, to see what the
next six months has in store. You're listening to the
Bloomberg Australia Podcast and welcome back to the Bloomberg Australia Podcast.
(12:00):
You're here with me Rebecca Jones, and I'm with Bloomberg
Economics as James McIntyre. We're conducting an autopsy of sorts
on the latest decision from the RBA to cut interest rates.
Nobody paus over every word spoken by the Governor Michelle Bullock.
Then you, James, So tell me when the board meets next,
which is going to be in July. What are they
(12:23):
going to be looking for between now and then that's
going to help them make their decision.
Speaker 2 (12:30):
Well, the key ones are going domestically are going to
be the labor market and inflation. We've got some GDP
data coming out as well, but we pretty much know
from a lot of the real time tracking around how
things are going, especially around the consumer, which is a
key focal point for the RBA. But it's really going
to be about is that labor market still holding up
(12:51):
strong and or how much slack is emerging in the
labor market, and what's going on with inflation. We'll only
have one of the monthly indicators for May, so we
won't have the full quarterly suite. We'll have to wait
for the August meeting for that. But those are the
key domestic things now. When it comes, however, confidence could
(13:12):
be hit and buffeted, either confidence in terms of the
share market and any wealth effects or impacts from that,
or business and consumer confidence could be derailed by whatever
we see coming from offshore. So it's not just the
domestic story that the RBA is going to be worried about.
If we think about the China US truce being something
(13:33):
that kept a fifty basis point cut off the table,
if there's an eruption, if there's that truce is crumbles
and that there is an eruption of concern around trade,
or maybe it might be the bond markets melting down
over the US fiscal position over the next couple of weeks,
you know, that could be something that could tip the
(13:55):
RBA over into delivering a further cut in July. Our
forecast had been for the year that the RBA would
be delivering it early another two this year markets are
there at three, and that those two rate cuts would
be delivered gradually and slowly and dribbled out over time
in August and November. But if there is this shock,
if there is more uncertainty, and that uncertainty corrodes business
(14:18):
and consumer confidence, then we'd expect that the RBA might
be prepared to step up and deliver another cut in July.
Speaker 1 (14:28):
So to recap, it was nice of the RBA this
month to show its willing to cut and to reveal
a bit more about their thought process. These decisions aren't
mutually exclusive. The RBA doesn't exist in a bubble outside
of the forces that are occurring in geopolitics and other
(14:48):
economies around the world. We still don't know how fast
or how far they're going to go in terms of
rate cuts. But the language to your to your view, James,
is that the RBA is poised and alert to these happenings,
and if things do take a nasty turn. They're going
(15:10):
to be right there in the game trying to minimize
the damage. Let's try not to end on a downer,
which often happens when we're talking together about the economy.
I understand this, James, looking at your crystal ball, What
are you predicting is going to happen at this next
meeting in July?
Speaker 2 (15:29):
Cut a hold? Well, yeah, Well, the crystal ball, or
the optimistic view, is that we don't have these big
disruptions and that the things continue to tick over the economy,
and that means the RBA can hold so and deliver
that next rate cut when they do their full assessment
in August. So the positive view on the economy is
(15:51):
that growth can continues to tick along. The labor market
remains fairly well resilient. We've still got a four point
one percent unemployment rate, it's incredible, and that that continues
to move along. We get some improvement in residential housing supply. Yes,
you will get a little bit of a pickup in
house prices, but that the RBA is able to kind
(16:13):
of look through and go, well, we are still restrictive.
We do need to let the leash off the economy
to take our foot off the brakes, and doing that
is a slow gradual process. So hold in July with
cut in August. That's our base case. But if they
do look at things, and if they're seeing a pretty
(16:35):
ugly picture outside the rear view mirror that unfortunately they
have to look through, then then we could see them
step on that accelerator to try and give us the
best chance of weathering whatever storms the global economy throws
our way.
Speaker 1 (16:51):
James Becinta, thank you for joining me today. Thanks Beck,
and thank you for listening to the Bloomberg Australia podcast.
I'm Rebecca Joe. This episode was recorded on the traditional
lands of the world, Wondery and Gadigal People. It was
produced by Paul Allen and edited by Ainsley Chandler and
Chris Burke. Don't forget to follow and review the show
(17:12):
wherever you get your podcasts, and sign up for Bloomberg's
free daily newsletter, Australia Briefing. Go to Bloomberg dot com
to subscribe.
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