The Reserve Bank of Australia (RBA) decided to hold the cash rate at 4.10% on Tuesday. This decision follows February’s move to ease monetary policy for the first time in over four years. 

In a widely anticipated move, the RBA Board noted that underlying inflation continues to ease in line with the most recent forecasts published in February. Recall, the RBA’s preferred underlying inflation measure, the trimmed mean, increased by 0.5% in December quarter, taking the annual rate down from 3.6% to 3.2%. More recent data underscores the downward trend, with the monthly CPI indicator down to 2.4% in the 12 months to February, from 2.5% in January. However, in line with recent messaging from Reserve Bank officials, the RBA Board refrained from providing clear forward guidance on the timing or scale of future rate cates.

The progress on inflation is encouraging, but the RBA Board highlighted both domestic and global risks to the outlook. Domestically, a range of labour market conditions continue to remain tight. The Reserve Bank singled out low rates of labour underutilisation and returns from business surveys indicating that labour is still a constraint for a range of employers. The Bank also continued to highlight uncertainties regarding the lags in the effect of monetary policy and how firms’ pricing decisions and wages will respond to the slow growth in the economy and weak productivity outcomes. 

Chart 1: Headline and underlying (trimmed mean) inflation 

The increased emphasis placed on global economic and geopolitical uncertainty was notable. The Board highlighted the impact of recent announcements from the United States on global confidence and the amplified economic impact if the scope of tariffs widens, or whether other countries retaliate. If realised, these factors could slow economic growth, particularly if households and firms delay spending amid current uncertainty.

The precise impact of recent announcements from the United States on the Australian economy is highly uncertain. As the RBA recognised on Tuesday, inflation “could move in either direction”. However, a weaker growth outlook for global and Australian economies could bring the timeline for future rate cuts forward. As ever, the RBA will want to be confident that inflation will return to the midpoint of the target band on a sustainable basis before reducing the cash rate further. It is not yet clear whether global events will tip their confidence either way. Deloitte Access Economics expects a further 50 basis points of cuts during 2025. 

The RBA Board’s decision was announced against the backdrop of a critical week for the Federal government. Last Wednesday, the Treasurer handed down the 2025-26 Federal Budget. Cost-of-living relief for Australian taxpayers and households once again took centre stage, including new personal income tax cuts to take effect from 1 July 2026. Provision was also made for communities affected by Cyclone Alfred. An underlying cash deficit of $27.6 billion is expected in 2024–25. Download Deloitte’s Federal Budget report for more insights and analysis.

On Friday, Prime Minister Anthony Albanese announced that Australia will go to the polls on the 3rd of May. While the Reserve Bank’s decision to leave the cash rate unchanged is unlikely to materially swing voters, it’s clear that the cost-of-living will be at forefront of many Australian’s minds in a month’s time.

This newsletter was distributed on 2nd April 2025. For any questions/comments on this week's newsletter, please contact our authors: 

This blog was co-authored by Tom Harding, Manager at Deloitte Access Economics

Click on the links below to read our previous Weekly Economic Briefings:

• 2025-26 Federal Budget (28 Mar)

• High speed tariffs (21 Mar)
• New year, same challenges for Australia’s housing market (11 Mar)
• Broad-based growth signals turning point for Australia’s economy (5 Mar)