ABC News Daily The Trump cloud hanging over the RBA
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May 21, 2025 Ian Verrender, ABC's chief business correspondent, dives into the economic landscape with fascinating insights. He discusses the recent drop in interest rates and whether we've truly achieved a 'soft landing' after the pandemic. Verrender highlights how Donald Trump's global influence could disrupt these positive trends. The conversation also tackles the implications of interest rate cuts on households and employment, as well as the ongoing challenges posed by tariffs and inflation in the wake of Trump's policies.
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Shift to Rate Cuts Amid Stable Inflation
- Interest rates have been cut from 4.1% to 3.85% as inflation falls below 3% and employment remains strong.
- The Reserve Bank cautiously approaches rate cuts to maintain inflation control while supporting the jobs market.
Faster Rate Cut Pass-Through
- Banks are passing on rate cuts faster due to increased competition, especially from Macquarie disrupting the big four.
- Rate cuts are being implemented quicker this time, aiding borrowers sooner than usual.
RBA’s Cautious Rate Cut Strategy
- The RBA debated rate cut size and chose a cautious 25 basis points over 50, reflecting uncertainties.
- They model severe global downturns and believe their current tools suffice to manage economic shocks.