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Australian mortgage holders may face a shift in the interest rate landscape following fresh developments in US trade policy, with economists at ANZ suggesting that rate cuts could arrive sooner—and in larger increments—than previously expected.
As reported by news.com.au, ANZ no longer rules out a faster pace of rate reductions, a shift from its earlier stance that had projected no changes until August. This comes after US President Donald Trump announced a 10% tariff on all imports into the US, which could impact Australia’s $23.9 billion in exports to the US. These goods account for under 5% of Australia’s total export value, but economists warn of broader implications due to Australia's exposure to global markets.
Adam Boyton (pictured above left), head of Australian economics at ANZ, said the Reserve Bank may act to protect domestic spending and investment from weakening consumer and business confidence.
“Additional easing from the RBA would offset much of the risk that a deterioration in confidence flows through to weaker consumer spending and business investment. So, our broader GDP growth, unemployment and inflation forecasts will be little impacted. Rather, the cash rate (and potentially the AUD) will make the adjustment to limit the impact on the real economy,” Boyton said.
The RBA left the cash rate steady at 4.10% during its most recent meeting, but it acknowledged the potential risks posed by the new tariffs. ANZ now forecasts a possible rate cut as early as May, with additional reductions potentially following in July and August.
A series of cuts totalling 75 basis points would bring significant changes for mortgage holders. A 25 basis point cut on a $600,000 loan would lower repayments by around $91 per month, while a 50 basis point drop would cut monthly repayments by $181. If all three predicted cuts occur, borrowers could see monthly payments decrease by approximately $269.
However, not all observers are optimistic about the implications of such rapid easing. Sally Tindall (pictured above right), data insights director at Canstar, warned that while lower rates may bring relief to households, they also signal deeper economic concerns.
“On Tuesday, Governor Bullock said the current cash rate was ‘mildly restrictive’. Three cuts in quick succession, as ANZ is now forecasting, would mean the Australian economy was back under extreme pressure and no one wants that. The RBA is on high alert but it will resist making quick decisions, particularly when the full impact of the tariff war is unlikely to be clear for some time,” Tindall said.
HSBC’s chief economist for Australia, Paul Bloxham, also weighed in, stating that while Australia may face only the minimum 10% tariff, the country’s close ties to global—and particularly Asian—markets leave it vulnerable to broader economic fallout.
“Although Australia faces only the minimum US tariff at 10%, and commodities are substitutable across markets, offering the economy some protection, the country is still highly exposed to the global growth outlook, and particularly to growth in Asia,” Bloxham said.
Bloxham anticipates a rate cut in May, followed by three more cuts through 2026. His forecast would bring the cash rate down to 3.10% by early that year in an effort to counteract potential drag from weakening global demand.
