‘Shouldn’t get one’: Fury over interest rate cut hopes

xDesperate Aussies are hoping for more rate cut relief to ease cost of living concerns but questions remain over whether it is the best move.

Desperate Aussies need to be granted three more rate cuts before their dire cost of living situation improves.

That’s according to one of Australia’s leading economists who said February’s RBA rate cut has done little to ease financial stress in households nationwide.

However debate continues to bubble away as to whether it’s the best thing for Australia’s economy as a whole, right now.

Stephen Koukoulas – regarded by The Australian Financial Review – as one of Australia’s most influential economists – believes struggling Aussies will be gifted three more rate cuts through 2025.

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Economists are expecting more rate cuts from RBA Governor Michele Bullock. Picture: NewsWire / Nikki Short

Speaking on Mark Bouris’ Yellow Brick Road podcast, Koukoulas, said February’s rate cut had done next to nothing to ease the financial burden on Aussies and little will until the RBA continues to slash the cash rate.

Only then will Aussies nationwide be able to toss the gorilla of money worries off their backs.

“People are still not changing the way they spend,” Koukoulas, who is a former senior economic adviser to the Prime Minister’s Office, said.

“We need to see three or four rate changes before we see a real change from interest rate relief.”

Koukoulas said the vast majority of Aussies are still battling with financial concerns despite overall improvements in the economy, including a reduction in inflation.

“Interest rates are still very restrictive on the economy,” he said.

“They are still causing financial stress through the cost of living issue. Inflation has fallen but cost of living is still very much about mortgage serviceability.

“[Worries about] cost of living are not gone, it is still bad.”

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Economist Stephen Koukoulas says Aussies won’t get any real relief until successive rate cuts, Picture: Annette Dew Picture: Dew Annette

Despite the big headlines about February’s 25 basis points cut to the RBA cash rate, bringing it down to 4.1 per cent, Koukoulas said it didn’t move the needle for Aussie households.

“Consumers aren’t stupid,” he added.

“They know what is going on. They see the first 25 [basis] points [cut] and think ‘that doesn’t change my life’, the second – ‘that’s better’, but it’s only by the time you get three or four cuts that things change.”

Such an outlook corresponds with polling that indicates Aussies are planning to hunker down this year and save rather than spend in a trend expected to drag on businesses and stymie economic growth and property prices.

February’s rate cut certainly hasn’t led to a change of conditions in most property markets around the country.

The good news for mortgage holders is that Koukoulas believes Aussies will get what they are wishing for – four rate cuts in total by late 2025 of a likely total of 100 basis points. That will start with another rate cut when the RBA meets again on May 20.

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Aussie households would welcome more mortgage relief. Picture: Jason Edwards

Real relief might not flow through until 2026 but Koukoulas is confident it will come.

“I do think the RBA will deliver the rate cuts that are priced into the market,” he said.

“We are going to see a series of three, four rate cuts. I think they will cut in May, July and then September. The first cut [February] is just that figurative sigh of relief, it’s later when the cash flow relief comes.”

Koukoulas said that the RBA would likely make moves to considerably cut interest rates given an improving economic outlook, a stable political environment and the tempering of inflation.

However he did says the RBA might not go much further than four rate cuts in the current cycle given global uncertainty. The US Federal Reserve adopted a ‘wait and see’ approach early this month, when it kept rates on hold in the 4.25 per cent to 4.5 per cent range.

In some quarters, the RBA’s February cut was seen as an appeasement to the Labor Government ahead of the Federal Election and Bouris echoed the thoughts of several leading economists as to whether the cash rate should have been slashed at all.

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Mark Bouris has questioned whether a series of rate cuts right now is the way to go. Picture: NewsWire / John Appleyard

Those thoughts were based on the fact Australia’s trimmed mean consumer price index – which gives a view of underlying inflation by reducing the effect of irregular or temporary price changes that can impact the CPI – was 2.9 per cent in the first quarter of 2025.

That is just inside the RBA’s target inflation band of two to three per cent.

As a result, the rate cuts could hinder the RBA’s ability to keep inflation, which has been a massive worry for several years now, under control.

“There’s was no way we should be getting a rate cut, if you look at the December quarter number and even the quarters before that. We should not get a rate cut, it’s not in the band,” Bouris said.

Bouris named respected economist Chris Joye as one leading figure who had questioned the RBA’s rate cutting moves.

After the February rate cut, Joye wrote in the AFR, that the RBA had “ignored it’s own numbers.

“To avoid the potential for deep rate cuts of 100 basis points or more suddenly being the central election issue, Martin Place has bent over backwards this week to dismiss its own new neutral numbers,” Joye wrote.

Bouris also said he had butted heads with Federal Treasurer Jim Chalmers over several contentious economic issues, including inflation and productivity.

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