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    You are at:Home»News»International»Brutal reason interest rate cuts have been delayed for millions of Aussies
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    Brutal reason interest rate cuts have been delayed for millions of Aussies

    Papa LincBy Papa LincApril 1, 2025No Comments5 Mins Read0 Views
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    Brutal reason interest rate cuts have been delayed for millions of Aussies
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    Millions of Australians have been dealt a cruel April Fool’s Day joke with Donald Trump blamed for borrowers being denied an interest rate cut during a cost-of-living crisis. 

    The Reserve Bank left the cash rate on hold at 4.1 per cent on Tuesday, declining to cut rates again like it did in February, this time citing new American import tariffs.

    ‘On the macroeconomic policy front, recent announcements from the United States on tariffs are having an impact on confidence globally and this would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures,’ the board said.

    The RBA’s latest decision is occurring a day before the US imposes new tariffs on Australian agricultural and pharmaceutical exports, amid fears this will spark a global trade war that could push up inflation again.

    ‘Geopolitical uncertainties are also pronounced. Inflation, however, could move in either direction,’ it said.

    ‘Many central banks have eased monetary policy since the start of the year, but they have become increasingly attentive to the evolving risks from recent global policy developments.’

    Governor Michele Bullock said the Reserve Bank was trying to predict how China, Australia’s biggest trading partner, would react to the US tariffs.

    ‘What will be important for us is particularly what happens with our major trading partners and China,’ she told reporters in Sydney. 

    Brutal reason interest rate cuts have been delayed for millions of Aussies

    Millions of Australians have been dealt an April Fool’s Day joke with Donald Trump blamed for borrowers being denied an interest rate cut during a cost-of-living crisis

    ‘We do know what to be worried about. A trade war with escalating tariffs and reciprocal tariffs is going to slow down the growth in world trade.’

    A hit to Chinese economic activity could potentially weaken the price of iron ore, Australia’s biggest export, which in turn reduces federal government tax revenue.

    ‘Where you see these things often show up is in commodity prices,’ Ms Bullock said.

    But she said the new RBA board did not consider a rate cut on Tuesday, clarifying this was a consensus decision. 

    ‘The board did not explicitly discuss a rate cut,’ she said.

    ‘It did talk a little bit about downside risks and including the global downside risks but it did not explicitly discuss a rate cut.

    ‘We felt that holding was the best thing – it was a consensus decision.’ 

    Prime Minister Anthony Albanese also misses out on an election campaign rate cut, with opinion polls showing neither major party is likely to have a majority in the next Parliament after May 3. 

    The RBA is concerned cutting rates too quickly could see inflation shoot up again. 

    Governor Michele Bullock said the Reserve Bank was trying to predict how China , Australia's biggest trading partner, would react to the US tariffs

    Governor Michele Bullock said the Reserve Bank was trying to predict how China , Australia’s biggest trading partner, would react to the US tariffs

    ‘The board needs to be confident that this progress will continue so that inflation returns to the midpoint of the target band on a sustainable basis,’ it said.

    ‘It is therefore cautious about the outlook.’

    Financial markets and the major banks are expecting three more rate cuts during the coming year.

    But the Reserve Bank on Tuesday tried to downplay expectations of more relief for borrowers.

    ‘The board is resolute in its determination to sustainably return inflation to target and will do what is necessary to achieve that outcome,’ it said.

    Headline inflation at 2.4 per cent sits in the middle of the RBA’s 2 to 3 per cent target, thanks to $300 electricity rebates that are now being extended.

    But underlying inflation at the end of last year was higher at 3.2 per cent, when volatile items like petrol and subsidised electricity bills were excluded. 

    ‘The board’s assessment is that monetary policy remains restrictive,’ the RBA said.

    The RBA's latest decision is occurring a day before the US imposes new tariffs on Australian agricultural and pharmaceutical exports, amid fears this will spark a global trade war that could push up inflation again

    The RBA’s latest decision is occurring a day before the US imposes new tariffs on Australian agricultural and pharmaceutical exports, amid fears this will spark a global trade war that could push up inflation again

    ‘The continued decline in underlying inflation is welcome, but there are nevertheless risks on both sides and the board is cautious about the outlook.’

    The futures market had regarded a rate cut on Tuesday as a 10 per cent chance. 

    The RBA met on Monday and Tuesday, a week after the federal government’s pre-election Budget extended its quarterly $75 electricity rebates by another six months to the end of December.

    Before that announcement, it had feared inflation climbing up to 3.7 per cent by the end of 2025.

    The Treasury Budget papers predicted headline inflation, also known as the consumer price index, climbing to 3 per cent by mid-2026, following the end of those electricity rebates. 

    The RBA’s next decision on May 20 will be made after the release of March quarter inflation data. 

    ‘I’m not suggesting I’ve made up my mind on May and the board’s made up their mind on May,’ Ms Bullock said. 

    ‘We’re just going to wait and see, see what the data draw out and if we’re still on track and it gives us a bit more certainty, then we can start to consider when it’s appropriate to start lowering rates.’ 

    The Trump Administration, on April 2, is slapping 25 per cent tariffs on pharmaceutical imports, which would be in line with the import taxes on steel and aluminium that came into effect on March 12.

    The tariffs on agriculture are yet to be determined with meat Australia’s biggest export to the US in 2024.



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