Australian households could finally see relief on mortgage repayments as economists widely predict the Reserve Bank of Australia (RBA) will deliver an interest rate cut in May. A growing number of financial analysts, including experts from Westpac and CBA, now view a 25 basis point (bp) cut as all but certain, as the central bank shifts its focus from inflation control to economic stability.
Westpac and CBA Say May Cut Is a “Done Deal”
Westpac’s Chief Economist Luci Ellis said homeowners should prepare for a 0.25% cut, with the cash rate expected to drop to 3.85% at the next RBA board meeting. While there is speculation of a larger move, Ellis dismissed extreme predictions, stating:
“We do not regard an inter-meeting cut or a 50bp cut as plausible, contrary to some of the more breathless commentary.”
However, she did not rule out the possibility of a 35bp cut to 3.75%, suggesting the RBA may consider unconventional increments if economic conditions worsen.
The Commonwealth Bank of Australia (CBA) echoed this sentiment, calling the May cut a “done deal” contingent on trimmed mean inflation coming in at 2.8% annually, up 0.6% for the March quarter.
RBA’s Policy Shift: From Data Dependence to Economic Protection
Traditionally, the RBA has been data-driven, reacting to quarterly inflation and labour market reports. But according to Ellis, that has changed. The RBA now appears to be preemptively adjusting rates to shield the Australian economy from growing global headwinds.
“Holding rates steady in the face of the global turmoil and softer momentum in the labour market – for the sake of 0.2 ppts on inflation – would be very hard to explain,” Ellis added.
This reflects the shift highlighted in The Canberra Times, which noted that “healthy inflation data should help ease mortgage pain”, supporting the case for immediate monetary easing.
Global Turbulence Adds Pressure on RBA to Act
The central bank's recalibration comes amid rising concerns about geopolitical instability, particularly the escalating trade war between the US and China. The United States recently imposed a 145% import tariff on Chinese goods, prompting a 125% retaliatory tariff from China.
Ellis warned this back-and-forth could significantly hamper global and domestic growth.
“Even though we do not expect the US administration to implement tariffs at the rates originally announced, some damage has already been done,” she said.
US-China Trade War Raises Global Uncertainty
US Treasury Secretary Scott Bessent offered a slight glimmer of hope, noting there’s still “a path” to a trade agreement, but admitted that President Trump has yet to speak directly with President Xi. The lack of diplomatic progress continues to rattle international markets and raise fears of a slowdown in Chinese demand, a crucial driver for Australian exports.
AMP and IMF Forecast Economic Downturn in Australia
AMP’s Chief Economist Dr Shane Oliver told NewsWire that Australia’s economic outlook has clearly shifted. Inflation is no longer the dominant concern — now, global trade disruptions are the key risk.
“We’ve had three years when inflation dominated, but now we’ve moved onto the trade war between the US and China which seems to be dominating.”
Dr Oliver cited IMF projections, which indicate the trade conflict could slash $13 billion from Australia's economy, a concern echoed in recent Canberra Times reporting on mortgage and cost-of-living stress.
More Cuts on the Horizon: August and November in Focus
In addition to the expected May cut, Ellis predicted two further rate reductions in August and November, aligning with expectations of broader stimulus efforts to support domestic demand.
This sequence of cuts could provide much-needed breathing room for Australian households grappling with high mortgage repayments and cost-of-living pressures.
Conclusion: Rate Relief Incoming, but Global Risks Loom
With inflation stabilising and the labour market showing signs of weakness, the RBA appears poised to deliver a May interest rate cut — a decision backed by leading economists and financial institutions. While a 25bp cut remains the base case, policymakers may be forced to act more aggressively if international conditions deteriorate further.
The message from experts is clear: Australian mortgage holders should prepare for relief — but also remain vigilant as global economic uncertainty continues to cast a long shadow over domestic recovery.
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