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As the RBA’s May 2025 meeting approaches, all eyes are on the central bank’s next move.
After leaving rates on hold at 4.10% in April, many economists are predicting that we may see further rate cuts in the second half of 2025. But what will influence the RBA’s decision next?
Let’s dive into what’s driving these predictions, and what key analysis we can take from Mark Bouris and Stephen Koukoulas in their latest Property Insights update.
The Big Banks’ Predictions
As always, the big four banks play a crucial role in shaping expectations for interest rate moves. Here’s a breakdown of their predictions for May’s RBA board meeting and the coming months:
| Bank | Expected Basis Point Cut in May 2025 | Forecasted Cash Rate for Feb 2026 | Number of Rate Cuts Expected |
| Commonwealth Bank (CBA) | 0.25% Cut | 3.35% | 3 (February, May, August, November) |
| Westpac | 0.25% Cut | 3.35% | 3 (February, May, August, November) |
| National Australia Bank (NAB) | 0.50% Cut | 2.60% | 5 (May, July, August, November, February 2026) |
| ANZ | 0.25% Cut | 3.35% | 3 (May, July, August) |
Markets and the economists of the major banks are all now forecasting multiple rate cuts over the course of 2025, marking a stark shift in RBA’s previous stance on monetary policy.
The central bank had previously held firm on keeping interest rates steady, but recent economic data has raised concerns about Australia’s slowing economy. As a result, many experts are now predicting that the RBA will need to make multiple cuts in order to stimulate growth and hit their target inflation rate.
What does this look like for the average borrower?
If the RBA were to go ahead with an 0.25% reduction in the official interest rate, and your lender were to pass this on in full to you, this is how much you could save on your monthly repayments:
| Loan size | New monthly repayments | Drop in monthly repayment |
| $500,000 | $3,164 | -$76 |
| $600,000 | $3,797 | -$91 |
| $750,000 | $4,746 | -$114 |
| $1,000,000 | $6,328 | -$152 |
| Source: Canstar.com.au. based on an owner-occupier paying principal and interest with 25 years remaining in May 2025. Calculations assume a current interest rate of 6.06%. | ||
What’s Happening with Inflation?
The big question for the RBA will be inflation. While Australia has seen some relief in recent months, the central bank remains cautious about inflation and its impact on the broader economy.
Stephen Koukoulas told Property Insights that the inflation rate has performed so well in getting to the target range at 2.4%, that a May rate reduction is “done”.
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“The inflation data that came out two weeks ago showed a 2.4% headline inflation, with the trimmed mean at 2.9%,” Koukoulas said. “The RBA will likely be cautious in their wording, but a 25 basis point cut is almost certainly on the table for May 20.”
Koukoulas also noted that the trimmed mean inflation is heading in the right direction, converging towards 2.5%, which is a key signal the RBA will be looking for before taking further action:
“The run rate is converging to 2.5%, which the RBA will be happy with. They’ll be cautious, using all the right language to say they’re still worried about the outlook, but 25 basis points seems almost certain,” Koukoulas added.
However, as Mark Bouris pointed out, the RBA’s shift in focus to underlying inflation has been notable. In the past, the RBA would simply look at the headline CPI number and assess it based on the last 12 months, but they’ve recently started placing more weight on trimmed mean inflation, a measure that excludes extreme price movements (like volatile food or energy prices).
“The RBA is paying more attention to underlying inflation now. Previously, they’d focus just on the headline CPI, but now they’re looking at a broader range of inflation data,” said Bouris.
What’s Next?
For property investors, the stable rate environment offers an opportunity to reassess your portfolio without worrying about drastic rate hikes. As Mark Bouris noted in the update, “It’s not about timing the market in the short term. It’s about having a solid strategy and looking at the fundamentals of your investment over the next five to ten years.”
If rate cuts are implemented, the main priority for borrowers should be understanding how it affects your mortgage. This may also be the perfect time to explore refinancing or reviewing your current mortgage setup through an experienced mortgage broker, to try and secure a better deal.
Consider locking in a lower rate or restructuring your loan while rates are favourable. Yellow Brick Road’s experienced mortgage brokers can guide you through the process and help you make informed decisions tailored to your needs.
While the RBA has left rates on hold for now, the path forward is becoming clearer. Inflation is under control, and many economists expect that the RBA will make its next move in May. However, global uncertainties, such as trade conflicts and geopolitical tensions, will continue to weigh on the RBA’s decisions.
For homeowners and investors, now is the time to stay informed and review your mortgage to ensure you’re making the best decisions for the coming months.
