3 Interest Rate Cuts Predicted for Australia Amid Trump Tariffs

The 10 percent baseline tariff on imports into America came into effect on April 5.

President Donald Trump arrives to speak during a “Make America Wealthy Again” trade announcement event in the Rose Garden at the White House on April 2, 2025. Andrew Harnik/Getty Images

ANZ Bank predicts the Reserve Bank of Australia (RBA) will cut interest rates three times in 2025.

This comes after Trump imposed universal reciprocal tariffs globally, including a 10 percent tariff on imports from Australia.

“Given the likely impact of the tariffs on global growth, as well as those already evident on markets, ANZ Research expects the RBA to lower the official cash rate in May, July and August, by 25 basis points at each meeting. That would see the cash rate at 3.35 percent come August,” Head of Australian Economics Adam Boyton said.

ANZ economists pointed out the tariff news was still being digested and the coming weeks would provide greater clarity on the scope for negotiation and responses from U.S. trading partners.

“At a macro level, the U.S. does not buy particularly large amounts of Australian exports, although there may be sectoral impacts from tariffs. The bigger risks for the Australian economy centre around the implications for global growth and domestic consumer and business confidence,” ANZ economists added in an internal research note to investors on April 4.

The RBA is due to meet on May 20 to decide on interest rates. Currently, Australia’s official cash rate is 4.1 percent.

ANZ expects each of the three rate cuts to be 0.25 percent but says a larger cut at the May meeting remains a possibility.

“On the information we have to hand, the market reaction and past RBA responses to global shocks, more aggressive RBA easing now seems more likely than not. Indeed, we would not rule out a 50bp cut in May, if sentiment sours and the global growth outlook deteriorates sufficiently,” ANZ economists said.

“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.”

ANZ noted that an RBA rate cut could help counteract the risk of a “deterioration in confidence” leading 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,” ANZ said.

“For commodity exporters like Australia, it is typically the price of exports that adjusts to global growth shocks more than volume. That means nominal GDP growth will be softer even if real GDP growth is little changed. That the economy is entering this period with growth in Q4 2024 around trend, near full-employment and moderating inflation is helpful.”

Tariffs Spark Reaction in Australia

The rate cut forecast comes after the first part of U.S. President Donald Trump’s 10 percent baseline universal tariff on all imports came into effect on April 5.

The “Liberation Day” tariffs apply on all imports, impacting $3 trillion worth of goods going into the United States each year.

Deputy Leader of the Opposition Sussan Ley talked up Australia’s relationship with the United States and wondered why Prime Minister Anthony Albanese had not secured a meeting with Trump.

“We have a unique relationship with the U.S. The question here is what effort did the prime minister go to or not go? And I’m not seeing the effort, I’m not seeing someone who did everything from the get-go,” she said on Sunrise.

“This is a president who foundationally works as a negotiator one-on-one. But if you can’t get in the room, then how can you have that conversation, that negotiation? And sure, get in the room, have the barney then, but you have to get to first base.”

However, Minister for Education Jason Clare said Australia was “not going to bend the knee to the United States” and would stand up for Australia every single time.

“What the U.S. have done here is wrong. They talk about reciprocal tariffs. There is zero tariffs on American goods coming to Australia. So there should be zero tariffs on what we sell to the United States. That’s why we say this is not the action of a friend,” he said on Sunrise.