Economists tip May 2025 for first interest rate cut as cost pressures continue

Half of Australia’s leading economists expect the Reserve Bank to hold off on cutting interest rates until May 2025, according to new survey findings.

The latest Finder RBA Cash Rate Survey found all 40 experts and economists polled expected rates to remain at 4.35% for December 2024.

Nearly half (49%) of respondents predicted the first rate cut would come in May 2025, while 24% forecast cuts would begin even later.

ANZ economist Adelaide Timbrell said economic resilience meant only modest cuts were likely next year.

“With the economy – notably jobs growth and business conditions continuing to show resilience, we are also shifting our view on the quantum of rate cuts and now expect only two, in May and August 2025. That leaves the terminal cash rate at 3.85%,” Timbrell said.

The survey revealed mixed views on Australians’ financial prospects for 2025, with 58% of experts believing most people would be better off.

However, some economists warned challenges would persist.

“Major factors like the high cost of living and the housing crisis are entrenched and require long-term solutions. For many Australians, 2025 is shaping up to be much the same as 2024,” said Laing+Simmons’ Leanne Pilkington.

Several experts offered stark advice for navigating the economic conditions ahead.

“Pray,” advised UNSW economist Richard Holden.

“Don’t be scared of negative headlines, spend less than you earn and keep investing,” said QUT’s Adj Prof Noel Whittaker.

AMP economist Shane Oliver recommended mortgage holders focus on debt reduction.

“If you have a big mortgage, pay it down as quickly as you can,” Oliver said.

The survey found weak GDP growth and moderating inflation were influencing the RBA’s stance.

The University of Sydney’s Stella Huangfu noted Australia’s economic slowdown.

“Australia’s Q3 GDP growth was just 0.3 percent, with annual growth at 0.8 percent, the lowest since 2020. Weak household consumption points to limited economic momentum,” Huangfu said.