ANZ pulls forward rate cut call to July
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The news: ANZ has become the latest big bank to bring forward its rate cut forecast from August to July. The shift follows sluggish retail and building data released on Wednesday morning.
ANZ head of Australian economics Adam Boyton said in a note that a cut in July is now the “path of least regret”.
"Given today’s data showing a weak six-month trend in retail sales, the most recent reads on consumer confidence showing the prior uptrend remains stalled and ongoing uncertainty around US trade policy as we approach the expiry of the tariff pause, we now expect the RBA to cut the cash rate by 25 basis points at its July meeting," he said.
ANZ had previously expected the central bank to hold off until August to allow the board to consider a full quarterly set of inflation figures.
"Still, we think the meeting will be a much closer call than market pricing would suggest," he said.
"We’ll reassess the likely pace of easing after the July meeting and press conference, but for now we’ll run with 25 basis point rate cuts in July and August," he said, noting this is what ANZ had initially forecast back in April.
July rate cut hopes boosted by disappointing retail and housing data
More news: Economists were largely expecting a rate cut in July already, but sluggish retail and building approvals data released on Wednesday morning have seen some backing in this call.
AMP economist My Bui said the underwhelming release “adds to a long list of tepid economic data points that the RBA will look at in the next meeting”.
But listed below-trend GDP growth, slowing GDP per capita and mild inflation figures as among those “tepid” numbers, with resilient jobs figures potentially starting to show signs of deterioration.
“While we continue to see conditions improving from here thanks to lagged impacts from the cuts since February, recent disappointing data points to further cuts from the RBA to deliver more to boost the economy,” Bui said in a note.
“Our base case is for four more cuts in July, August, November and February.”
However, Betashares chief economist David Bassanese said it does not “necessarily” give the RBA a green light for next week’s rate meeting, noting credit card data suggests a more recent uplift in spending.
“What’s more, the case for a further decent decline in inflation in the June quarter - the main justification for lower rates — has not been established,” he said.
“Although May trimmed mean annual inflation dropped to 2.4%, this followed a solid 2.8% gain in April — and there’s every risk it could bounce back again in the more comprehensive and reliable June quarter CPI report later this month.”
He said it would be prudent to wait for the quarterly report and there’s “a lot more uncertainty than the market currently expects”.
Commonwealth Bank economists today, at a presentation in Canberra, described the result as “sluggish” and similar to what it is seeing in its internally-generated bank data. The bank’s analysts are saying this is due to “scarring” in the household sector following a lengthy period of high inflation and high interest rates that has shifted behaviour towards a preference to pay down debt rather than spend.
Sluggish May retail sales disappoint expectations
The news: Retail sales increased slightly in May with a 0.2% bump over the month, according to the Australian Bureau of Statistics. Economists were expecting 0.4% on average.
The numbers: The increase was on the back of non-food related spending, with clothing, footwear and personal accessory retailing up 2.9% and department stores up 2.6% following deep falls in April. No other sector saw a rise.
Food related spending fell 0.4%, the first dip in 2025, while household goods retailing and cafes, restaurants and takeaway food were flat.
In April, retail sales were flat after 0.2% growth in March.
The context: Retail statistics are one of the final pieces of data being released before the Reserve Bank meets to decide on rates next week.
The weaker than anticipated result will bolster calls for a 25 basis point rate cut from the RBA board on 8 July.
Independent economist Stephen Koukoulas took to X immediately following the release of retail and building approvals to data to say the weak results are a sign "monetary policy is still clearly way too tight".
What they said: “Retail spending rose in May driven mainly by a bounce-back in clothing purchases,” said ABS head of business statistics Robert Ewing.
“Retail spending was otherwise restrained this month, with a drop in food-related spending and flat results across household goods
“Clothing retailers and department stores were boosted by people buying winter clothes, having held off on those purchases with the warmer-than-usual weather last month.”
The source: Australian Bureau of Statistics media release
