Deloitte tips 150bps of rate cuts by end of 2026
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The news: Deloitte Access Economics is expecting a consistent series of rate cuts over the next two calendar years, despite the Reserve Bank warning markets not to expect a rapid succession of easing.
Deloitte thinks that the RBA will finish 2025 having eased by 75 basis points and follow it up with another 75 basis points of cuts in 2026.
The numbers: Deloitte economists are forecasting the unemployment rate to climb to 4.4% by the middle of 2025 with employment numbers to slow most in the market sector. The market sector is expected to grow by 0.9% this year, while the non-market sector, driven in part by government spending, is expected to grow by 3.9%.
Blue collar jobs growth is expected to soften to 0.3% over 2025 with the critical construction workforce slumping by 2026.
The context: The jobs market is a critical component for the Reserve Bank's outlook. Its resilience has surprised many economists and the central bank itself during the rate tightening cycle.
Despite the RBA cutting rates at its first meeting of the year, governor Michele Bullock struck a hawkish tone about the potential for other rate cuts.
What they said: “Last year saw the labour market continue to hum even as other economic indicators suggested recession-like conditions. Over 444,000 Australians gained jobs in the year to December 2024 with around two-thirds of these being full-time positions, highlighting the labour market's resilience," said Deloitte Access Economics partner David Rumbens.
“The underemployment rate has been trending downward since the end of 2023, particularly among early career workers, indicating minimal spare capacity in the labour market," Rumbens said.
“Beyond the labour market Australia’s economy appears to have passed its low point, and 2025 is expected to see an acceleration in economic growth. Even if that only involves shifting from first to second gear, the economy will benefit from higher incomes, sustained public sector demand, and interest rate cuts," he said.
The source: Deloitte Access Economics Employment Forecasts report
