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RBA boss deals major 2025 interest rate cut blow that will devastate millions of struggling Aussies

The Reserve Bank of Australia has held interest rates, but there's no sign of reprieve for those under mortgage stress.

Optimism that struggling Australians could get an interest rate cut this year has been shattered in an instant. Reserve Bank of Australia (RBA) governor Michele Bullock didn’t mince words when she was asked if borrowers could expect some reprieve in 2024.

"I hope I didn't give any impression that there would be any interest rate cut by the end of the year,” Bullock said on Tuesday. “I certainly don't believe I ever gave people that impression and you would understand why I'm very cautious about suggesting any rate increases or decreases.”

She made the candid admission that the central bank aren't counting on interest rate cuts until 2025 while discussing the board’s decision to hold the cash rate at a 12-year high rate of 4.35 per cent.

The Reserve Bank of Australia governor Michele Bullock said she's given no signs there will be an interest rate drop for Australians this year.
The Reserve Bank of Australia governor Michele Bullock said she's given no signs there will be an interest rate drop for Australians this year. (Getty)

The big four banks are all predicting the earliest interest rate drop in November and there are signs Australians are struggling under the weight of successive interest rate rises.


ANZ chief executive Shayne Elliott admitted the number of borrowers falling behind on their mortgages had risen 22 per cent in the last year on Tuesday.

But Bullock said interest rate cuts were not the silver bullet those suffering through the cost-of-living crisis might think it is.

“I would say to people who are struggling, part of the reason is not just interest rates. It's inflation,” she said.

This is the same rhetoric Yahoo Finance contributor Stephen Koukoulas explained here just last week as hysteria started building about multiple rate rises off the back of unexpected March inflation figures.

There are many rising costs, driven by inflation, that aren't impacted by the "blunt tool" of interest rate rises.

Consider alcohol prices driven by twice-annual indexation, food prices or insurance costs impacted by weather events.

Even petrol prices, which Bullock candidly admitted she had an “absolute shock” after recently trying to fill up her car.

"After all, interest rate hikes from the RBA will have approximately zero effect on global oil prices," The Kouk wrote.

Bullock's take? Her priority should remain to bring down inflation.

"That's the best thing I can do for them. I understand the interest rates hurt, but that's the tool I've got and that's the best thing I can do for them," she said.

Bullock did admit the RBA board considered increasing interest rates over the last six weeks, but acknowledged they are currently "restrictive" and have been "painful for many people".

"The process of returning inflation to target is unlikely to be smooth,” the RBA said in a statement following its decision to hold the cash rate steady.

Despite suggestions the central bank’s strategy for bringing down inflation needed to be more aggressive, the board is confident interest rates are at the "right level" to meet their target of 2 to 3 per cent by the end of 2025.

Despite this, Bullock said the board will not hesitate to "see the job through" if further interest rates are needed.

"If we have to move, we will," she said.

She said the stickiness of inflation has been "frustrating", but reiterated, in somewhat of a nod to her predecessor's catch phrase of the 'narrow path', that she believed the RBA was on the "right path".

The cash rate decision came just hours after the Australian Bureau of Statistics revealed retail sales volumes fell 0.4 per cent in the March quarter - the fifth time in the last six quarters.

Koukoulas described “miserable” numbers as proof Australians were pulling back their spending as he issued a warning that the economy desperately needs an interest rate cut or it risks plunging from our current per-capita recession into a “genuine” one.

“The economy is exceedingly weak. It's being crushed under the weight of oppressive monetary policy. Consumers are responding to the fact their cash flows are being hammered by high interest rates and cost of living pressures,” he said.

"We've got this situation where we're probably going to be on the cusp of not just a per capita recession, but genuine recession. The Reserve Bank needs to get on the spike and cut interest rates.”

Bullock said the board was doing everything in its power to avoid an economic crisis.

"We're not trying to tip the economy into recession because really the worst thing that could happen for many people is to lose their jobs,” she said.

The path to an interest rate drop is "highly uncertain" and the central bank has admitted inflation has not only remained high, but it's dropping slower than expected.

"The Board expects that it will be some time yet before inflation is sustainably in the target range and will remain vigilant to upside risks,' the board said in a statement.

The RBA board said it would monitor the "global economy, trends in domestic demand, and the outlook for inflation and the labour market" before making any decisions about interest rate cuts, or hikes.

A key figure will be March GDP, which comes out in early June.

Economists are divided on an interest rate cut, some forecasting one in November and others claiming there's another three in our future.

  • Commonwealth Bank (CBA): Cash rate peak: 4.35 per cent. First cut: Likely November 2024. Rates to drop to 3.10 per cent in late 2025.

  • ANZ: Cash rate peak: 4.35 per cent. First cut: Around November 2024. Rates to drop to 3.60 per cent by this time next year.

  • NAB: Cash rate peak: 4.35 per cent. First cut: November 2024. Rates to drop to 3.10 per cent by the end of 2025.

  • Westpac: Cash rate peak: 4.35 per cent. First cut: November 2024. Rates to settle at 3.10 per cent in September quarter of 2025.

Former governor Lowe has warned this week the fight against inflation is not over, and rate hikes could be required to thwart it.

But there are banks making out-of-cycle interest rate cuts to remain competitive, with mortgage holders urged to shop around.

Even if the RBA does cut interest rates, experts have warned the major banks may not pass on any cash rate cuts in full to mortgage holders.