n home borrowers are now expected to receive their most generous rate cuts in more than a decade as a result of Donald Trump’s tariffs.
ANZ has now adjusted its forecasts to have the Reserve Bank of cutting interest rates in May, July and August – taking the cash rate back to 3.35 per cent for the first time since March 2023.
With February’s relief factored in, home borrowers could have had 100 basis points of rate cuts within six months, with ANZ now forecasting a possible 50 basis point rate cut on May 20.
This would mark the most generous relief in a such short time since 2012 when introduced a carbon tax, and would be comparable to the Global Financial Crisis in 2009.
The cash rate would fall even faster than it did in 2019 and 2020 during the summer bushfires and the start of Covid.
The announcement comes after Treasurer Jim Chalmers warned the US tariffs had led to a ‘much more substantial risk’ of a recession.
‘We take seriously the warnings from economists around the world about the risk of a global recession,’ he said.
‘The effects on the n economy are expected to be modest, however, some parts of the agriculture, energy, mining and durable manufacturing sectors will be more adversely affected than others.’
Mr Chalmers remained optimistic about the n economy.
‘We expect the economy to grow in welcoming and encouraging ways, but the risks are obvious and substantial and they’re laid out in the document too,’ he said.
ANZ’s head of n economics Adam Boyton said the Trump Administration tariffs could stop businesses from investing as n consumers cut back on spending.
‘The bigger risks for the n economy centre around the implications for global growth and both domestic consumer and business confidence,’ he said.
The n share market plunged again on Monday morning losing close to $180billion, as the benchmark S&P/ASX200 shed 6.4 per cent of its value in early trade.
Mr Boyton said the Reserve Bank was now more likely to embark on deep rate cuts, like it did during the GFC.
‘On the information at hand, the market reaction and past RBA responses to global shocks, more RBA easing now seems more likely than not,’ he said.
‘Indeed, ANZ Research would not rule out a 50 basis point cut in May, if sentiment sours and the global growth outlook deteriorates sufficiently.’
While the 10 per cent tariff on is at the lower end of the Trump tariff scale, a 34 per cent tariff on China would have broad implications for global growth.
China, ‘s biggest trading partner, is also the world’s biggest customer of n iron ore, the commodity used to make steel.
A global slowdown would weaken ‘s already strained economic growth.
‘For commodity exporters like , it is typically the price of exports that adjusts to global growth shocks more than volume,’ Mr Boyton said.
This would weaken gross domestic product growth, based on the dollar value of the goods and services produced, factoring in volumes and prices.
‘That means nominal GDP growth will be softer even if real GDP growth is little changed,’ Mr Boyton said.
Of ‘s Big Four banks, ANZ, Westpac and the Commonwealth Bank are now forecasting four rate cuts would have occurred in 2025.
This would take the cash rate from 4.1 per cent now to 3.35 per cent by Christmas.
But NAB, ‘s biggest business lender, is expecting an extra cut in early 2026.
With February’s cut included, that would mean five cuts in total, taking the cash rate down to 3.1 per cent for the first time since February 2023.
The rate cuts to cope with Trump tariffs would be insufficient to undo the 13 RBA rate rises in 2022 and 2023.
Canstar data insights director Sally Tindall, who was a federal Labor government advisor during the GFC, said rate cuts weren’t necessarily good news if the economy was in danger.
‘ANZ’s forecast might seem like music to a borrower’s ears, however, we need to be careful of what we wish for,’ she said.
Banks could also be reluctant to pass on RBA rate cuts in full if wholesale funding costs for them increase.
‘There’s also no guarantee banks would pass on each of these cuts in full, particularly if they come racing in, one after the other,’ Ms Tindall said.