Major ‘rate cut’ prediction for every Aussie with a mortgage: What you need to know

•  Underlying inflation under 3 per cent

By STEPHEN JOHNSON, ECONOMICS REPORTER FOR DAILY MAIL AUSTRALIA

Published: 02:45 BST, 30 April 2025 | Updated: 03:03 BST, 30 April 2025

Australians are set to get some generous mortgage relief with underlying inflation back within the Reserve Bank’s target for the first time in more than three years.

Headline inflation, also known as the consumer price index, remained steady at 2.4 per cent in the March quarter.

But the annual figures showed underlying inflation falling to 2.9 per cent, putting it back within the Reserve Bank’s 2 to 3 per cent target for the first time since late 2021 when Sydney and Melbourne were still in Covid lockdown.

This core measure of inflation stripping out volatile items has fallen back within the band, even without the government’s extended $75 a quarter electricity rebates. 

Underlying inflation, known as the trimmed mean, is also within target for the first time since the December quarter of 2021 – before Russia invaded Ukraine and pushed up crude oil prices. 

The futures market is expecting the Reserve Bank to cut interest rates again on May 20, a fortnight after this Saturday’s election. 

The RBA cash rate is expected to fall to 2.85 per cent by Christmas for the first time since November 2022, which would imply five 25 basis point rate cuts.

With February’s rate cut factored in, the 150 basis points of relief in less than a year would be the most generous easing of monetary policy since 2012.

Australians are set to get some generous mortgage relief with underlying inflation back within the Reserve Bank’s target for the first time in more than three years

But Saxo chief investment strategist Charu Chanana said the Reserve Bank would be proceeding carefully, considering a weaker Australian dollar at 64 US cents could make imports more expensive.

‘Australia’s inflation surprise reinforces that we’re not past the inflation problem yet —especially with tariff risks still looming globally,’ she said.

‘The RBA will have to remain cautious, and while a May rate cut is fully priced in, expectations for five cuts this year may need to be revised down. 

‘This stickier inflation backdrop supports the AUD in the near term, unless clearer global recession signals emerge and shift the focus back to growth risks.’

Donald Trump’s 145 per cent tariffs on China, Australia’s biggest trading partner, have weakened the local currency. 

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Major ‘rate cut’ prediction for every Aussie with a mortgage: What you need to know

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