Australians have been told to forget about any more interest rate cuts in 2025, with the end of electricity rebates next month predicted to send inflation soaring.
While headline inflation is now back within the Reserve Bank’s two to three per cent target, the federal government’s $300 electricity rebates end on April 1 with the last quarterly payment of $75 for power providers to pass on.
Moomoo market strategist Jessica Amir said the return to full-price power bills will fuel inflation in late 2025, and rule out any hope of further rate cuts this year.
‘The thinking is now we’re probably not going to get any more rate cuts in Australia. That is a concern,’ she told Daily Mail Australia.
‘Power bills in Australia are still at record levels – if you take out the rebate, they’re going to keep on climbing.’
The Reserve Bank last month issued new forecasts showing inflation, now at 2.4 per cent, soaring to 3.7 per cent in late 2025 following the end of the power rebate plan.
Ms Amir said it was still too early to declare the cost-of-living crisis to be over, even though inflation has fallen to a three-year low for now.
‘We do know with inflation being cripplingly high, there’s still no answers,’ she said.
Australians have been told to forget about another interest rate cut in 2025 with electricity rebates finishing next month (pictured is stock image of a Melbourne house)
Soaring mortgage and rental payments has seen more Australians use buy now, pay later apps for groceries, via the purchase of gift cards from Coles and Woolworths.
‘That means that more people are continuing to use buy now, pay later companies because they’re increasingly being used as a budgeting tool,’ Ms Amir said.
The Reserve Bank cut interest rates in February for the first time since November 2020.
But the minutes of that meeting suggested the 25 basis point cut, taking the cash rate to 4.1 per cent, could possibly be the last in this cycle.
‘They emphasised that the decision at this meeting acknowledged the progress that had been made in reducing inflation while not committing the board to ease policy further,’ the minutes said.
Ms Amir said the RBA minutes highlighted the further rate cuts were becoming less likely.
‘There’s still not really a 100 per cent chance, there’s not even a 90 per cent chance, not even an 80 per cent chance, of an RBA rate cut,’ she said.
The Reserve Bank’s deputy governor Andrew Hauser last week cautioned Australians against expecting a series of interest rate cuts in 2025.
Moomoo market strategist Jessica Amir said this was likely to see inflation soar again in late 2025, and stop further rate cuts this year
‘The rate cut in February reduces the risks of inflation undershooting that midpoint, but the board does not currently share the market’s confidence that a sequence of further cuts will be required,’ he said.
He also suggested the RBA was focused on keeping inflation low, which could potentially reduce the likelihood of more rate cuts.
‘It does have one key job – and that is to ensure that, of all the things people do have to worry about, inflation is not one,’ Mr Hauser said.
‘High inflation hurts everyone. It hits living standards, particularly for those on low and fixed incomes. And it disrupts households and companies’ plans.’
Commonwealth Bank and Westpac are still expecting three more rate cuts in 2025 to take the RBA cash rate back to 3.35 per cent for the first time since March 2023.
But the futures market is now less certain about rate cuts, pricing in just two more rate cuts this year.
The RBA is expected to leave rates when it makes its next decision on April 1, and would be likely to wait until its May meeting, following the release of March quarter inflation data.
The Reserve Bank has even left open the possibility of raising interest rates again should inflation rise.
‘If data signalled inflation was proving more persistent than expected, it would be reasonable to… hold the cash rate at 4.1 per cent for an extended period – or by even tightening policy if the outlook was for inflation to rise,’ it said in the February minutes.
Treasurer Jim Chalmers may extend the electricity rebates in the March 25 Budget.
