Australia’s economy has shown stronger-than-anticipated growth in the June quarter, with GDP rising by 0.6 per cent. This positive result, fuelled by robust household consumption, is prompting analysts to reconsider the likelihood of further interest rate cuts by the Reserve Bank of Australia (RBA). The RBA had previously lowered rates three times this year, bringing them to 3.6 per cent.
According to Dwyfor Evans, Head of Macro Strategy at State Street Markets, the resilient jobs market and strong consumption figures raise questions about the necessity for additional policy easing. Evans suggests that this, combined with evidence of inflation exceeding targets, will likely reduce the prospects for further rate cuts. He anticipates this shift will lend support to the Australian dollar as other central banks continue easing their monetary policies, leading to a modest increase in short-term rates.
Josh Gilbert, a market analyst at eToro, believes the GDP figures will reassure the RBA that its current policy is effectively supporting economic growth. While markets still anticipate one more rate cut before the end of the year, Gilbert notes that today’s data may moderate expectations of an aggressive easing cycle, potentially removing a September rate cut from consideration.
KPMG chief economist Brendan Rynne projects one additional rate cut this year, with the subsequent two cuts pushed into 2026. Rynne attributes the improved consumer sentiment to near-full employment levels and the combined effect of stage 3 tax cuts and previous rate reductions, which are encouraging Australian households to increase spending.
