Momentum building for July rate cut after weak March quarter growth
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More news: Many economists are pulling forward their rate cut predictions in light of the underwhelming economic growth data over the March quarter. But not all agree that it will affect the Reserve Bank's upcoming July decision.
AMP deputy chief economist Diana Mousina said in a note that the "gloomy" growth outlook is an argument in favour of more interest rate relief for the economy. The RBA's own forecasts were tipping 0.5% growth over the first quarter of 2025.
"We had been expecting another 0.25% rate cut at the August, November and February board meetings but now expect another 0.25% cut in July. This means that the cash rate is likely to end up around 2.85% at the end of the rate cutting cycle," Mousina said in a note.
Goldman Sachs analysts are also backing a "strong case" for a 25 basis point cut in July. Their current base case is for cuts in August and November, but they're now seeing the risks as skewed to the downside.
EY chief economist Cherelle Murphy also sees a case for “much more monetary easing” and noted that if the RBA had been able to see how soft the economy was and the fall in inflation earlier, “the interest rate cutting cycle would have started sooner”.
IFM Investors chief economist Alex Joiner thinks the outcome "adds to the case that it is appropriate for the RBA to ease policy settings further", while Oxford Economics also considers July may now be likely for an earlier than expected cut. State Street Global Advisors said there could now be a faster easing cycle from the central bank.
However, ANZ does not expect the data will push the RBA to a July cut. The bank’s economists specifically pointed to an improvement in household income dynamics and they don’t think the decline in public demand will be sustained.
NAB has held its predictions steady but was already predicting cuts in July, August and November.
Treasurer unconvinced Coalition will be bipartisan on unrealised gains tax
More news: Treasurer Jim Chalmers has poured cold water on suggestions there’s a clear opportunity for the government to work with the Coalition to amend plans to tax unrealised gains in high-value super accounts.
Speaking at a post-National Accounts press conference in Parliament, Chalmers rebuffed suggestions that the Coalition is prepared to be bipartisan.
Prime Minister Anthony Albanese signalled recently that he is open to constructive talks to pass the legislation, perhaps with the Coalition rather than the Greens, as opposition Treasury spokesman Ted O’Brien suggested talks could be on the table.
But Chalmers said he’s “not convinced that the Coalition wants to have a conversation about these changes”. He noted that O’Brien and Nationals Senator Matt Canavan have taken different approaches on the issue in the media. Canavan this morning said the Nationals would “fight it to the death”.
“I don’t think they’re being real about that [bipartisanship],” Chalmers said at the press conference.
He also said that a lot of the debate is “not really about the method of calculation” and the changes are “modest” and “methodical”.
Chalmers further criticised coverage for “lying” and “shamelessly” claiming that the prime minister and senior politicians are “somehow exempt”.
“They are not. We made that clear that they are included in the legislation … it's been abundantly clear in black and white,” he said.
But he clarified that while commensurate treatment would be applied to defined benefit schemes, except for when there are exceptions in the Constitution, it was a “function of necessity” that liabilities are deferred until pension phase as those with those schemes can’t access their super to pay tax debts until that time.
The Treasurer was also questioned on relations with the US, after the UK secured an exemption from some tariffs.
“I don’t take any outcomes for granted when it comes to that engagement we’ve got with the Americans,” Chalmers said.
“We’ve made it very clear what we think about those tariffs and so we will continue to engage, as [those] in the UK have and most countries have, trying to get the best deal that we can for our people and for our industries,” he said.
He said he had spoken to a large American investor this morning about attracting more capital to Australia, noting “those decisions may be influenced by the unpredictability and the volatility in the US”.
Asked about the opportunities for Australia amid the tariff war, he said many global investors are “rethinking their investment strategies”.
“There is a global scramble for capital because people are rethinking their investment strategies,” he said, noting American bond prices indicated that investors are reconsidering their approach.
Chalmers confirmed that encouraging capital deepening to drive productivity is front of mind and said the government has an "open door and an open mind" to ways to drive this and to bring investment into Australia.
“Foreign investment from trusted sources has a really important role to play … the opportunity for Australia as a country with wonderful human capital, stable government, big opportunities in the energy transformation, big opportunities in the energy transformation, big opportunities in technology and data, an economy that’s grown despite all the challenges thrown at it … we’ve got a compelling story to tell the world,” he said.
Private sector recovery on track despite soft GDP: Jim Chalmers
What they said: Treasurer Jim Chalmers responded to the soft March quarter economic data by citing global headwinds and local natural disasters, while maintaining that the private sector recovery remains on track.
In a statement, Chalmers said the data shows the “economy continues to grow in the face of substantial economic headwinds at home and abroad”.
“While overall growth in the Australian economy remains subdued, the private sector recovery we have planned and prepared for is gradually taking hold," Chalmers said.
“With all the uncertainty in the world, any growth is a decent outcome.”
“Lower public demand, combined with global economic uncertainty and the impact of natural disasters, meant growth was weaker than expected.”
Chalmers said that despite these challenges, private demand and incomes are recovering.
“Today’s numbers show the private sector stepping up as public demand steps back,” he said.
While he conceded the quarter’s growth was below expectations, he pointed to international comparisons, saying Australia’s economy “remains one of the strongest in the world”, with inflation back within the target band and unemployment remaining low.
“Public demand has played a role in keeping the economy from going backwards over the past two years, but we know strong and sustainable economic growth is driven by the private sector,” he said.
“Our plan has always focused on restoring the private sector to its rightful place as the main driver of growth in our economy.”
He said the private sector-led recovery was “always going to be gradual” and the data shows it is on track.
The Treasurer is due to hold a press conference at 12.15pm AEST.
Economy grew 0.2% in March quarter
The news: The Australian economy grew 0.2% in the March quarter of 2025 and 1.3% over the year — half the quarterly growth economists had expected.
This soft result follows 0.6% growth in the December quarter, with GDP expanding 1.3% over 2024.
The numbers: There was no growth in government final consumption over the quarter. Household spending was up 0.4% and private investment rose 0.7%.
Public investment fell 2%.
GDP per capita declined 0.2% over the March quarter. In contrast, GDP per capita grew 0.1% in the December quarter — the first increase after seven consecutive quarterly declines.
The context: Government spending supported the Australian economy through 2024, offsetting sluggish business investment. However, that stimulus came under criticism for contributing to higher inflation.
With government spending easing, concerns have emerged about the private sector’s ability to sustain growth. Growth in government spending began dropping off in the December quarter and private investment staged an early pick up, but US President Donald Trump's tariffs have sparked concerns that uncertainty will dampen business investment globally and in Australia.
What they said: "Economic growth was soft in the March quarter. Public spending recorded the largest detraction from growth since the September quarter 2017. Extreme weather events reduced domestic final demand and exports. Weather impacts were particularly evident in mining, tourism and shipping," said ABS head of national accounts Katherine Keenan.
The source: Australian Bureau of Statistics
