No rate cut in 2025: ANZ Research

ANZ Research no longer expects a cut to Australia’s official cash rate in 2025, and thinks February is the next plausible option.

The Reserve Bank of Australia’s (RBA) Monetary Policy Board left the cash rate unchanged at 3.60 per cent in September, and the post-meeting statement was a little more hawkish than ANZ Research had expected.

Looking forward, ANZ Research’s detailed consumer price index (CPI) preview points to a 0.9 per cent quarter on quarter increase in the trimmed mean in the third quarter of calendar 2025, with upside risk. As a result, a rate cut from the RBA in November is no longer expected.

ANZ Research remains of the view a final easing to 3.35 per cent is more likely than not, although the decision now appears to be between one rate cut and no additional easing (rather than, for example, a question of one versus two or more cuts).

February seems to be the first plausible month for that easing (which is where ANZ Research has moved the rate cut to). However, depending on third-quarter CPI and other data, the Board might want more time to be certain inflation is contained and sustainably heading toward the mid-point of the target.

Scope

Price and cost indicators from business surveys suggest there is scope for lower inflation and the likely third-quarter outturn is a hiccup, rather than the start of a new trend. ANZ Research also thinks the labour market has eased a little over recent months versus the RBA’s view conditions have been “steady” and “stable”.

And while leading indicators of activity (such as forward orders) suggest a further lift in year-on-year gross domestic product growth, the absence of what had been widely anticipated additional monetary easing in the final months of this year could see a pullback in the recovery of private demand. Ultimately, though, it appears increasingly likely this will be one of the shallowest easing cycles on record.

The recovery in Australia’s housing market appears to be picking up pace. Monthly growth in capital city housing prices is at its strongest since late 2023, and monthly growth in housing credit is at a three-year high.

While building approvals declined in August after a fall in July, annual growth is still positive, albeit only just. The tightness in supply is likely to support ongoing growth in housing prices.

The household spending recovery lost some momentum in August, with spending only rising 0.1 per cent, month on month. Annual growth eased to 5.0 per cent, year on year, from 5.3 per cent year on year in July. This marks the second consecutive monthly decline in goods consumption, following strong prints in May and June which coincided with end of financial year sales events.

Adam Boyton is Head of Australian Economics, Adelaide Timbrell is a Senior Economist, and Madeline Dunk, Aaron Luk & Sophia Angala are Economists at ANZ

This is an edited version of the ANZ Research report “Australian Macro Weekly: inflation to delay the final rate cut”, published October 3, 2025.