He's also expecting an RBA rate cut by May
There will be a gradual economic recovery in 2025, underpinned by easing inflation and potential rate cuts by the Reserve Bank of Australia (RBA), according to Bendigo Bank chief economist David Robertson (pictured above).
In his final economic update of the year, Robertson noted that the RBA’s decision this week to leave the cash rate unchanged at 4.35% was in line with expectations. Rates have remained steady throughout 2024, a move he described as key to achieving a sustainable return to the central bank’s 2–3% inflation target.
“Rates remained unchanged throughout 2024, which was our forecast at the start of and throughout the year,” Robertson said. “The RBA staying the course means a sustainable return to target inflation is still on track.”
The economist expects the RBA to begin easing rates by May 2025, as core inflation continues to decline. He also predicts a modest rise in unemployment and heightened geopolitical and trading challenges, particularly as US tariffs are imposed. However, he said Australia is expected to be less affected by these challenges than many other countries.
“While there’s been growing pressure to cut rates earlier, this overlooks two key factors,” Robertson said. “Firstly, the RBA was slower to hike rates in 2022 and didn’t lift rates to as restrictive a level as many global peers. Our current rate is less than 1% above neutral territory. Secondly, any earlier cuts could have undermined the fight against inflation, which is the root cause of cost-of-living pressures.”
He also noted that core inflation has now eased to 3.5%, and upcoming inflation readings in January and April 2025 will likely provide the evidence needed for the RBA to cut rates in May.
Robertson pointed to the latest GDP data as confirmation that the RBA’s restrictive policy is effectively slowing demand. He said quarterly GDP growth improved slightly from 0.2% to 0.3% in the third quarter, but annualised growth remains weak at just 0.8%, the slowest pace outside the pandemic since the 1991 recession. He added that Australia remains in a per-capita recession.
“Growth is currently propped up by public spending and population growth,” he said. “While this doesn’t justify rate cuts now, it is a reminder that monetary policy is working. Next year, rate cuts can support private sector recovery, allowing it to take over from government-led spending.”
Robertson also highlighted in his latest economic update potential global headwinds in 2025, particularly from US tariffs and China’s economic policies. He noted that Australia’s trade exposure to the US is limited, with only 5% of exports — mostly beef, gold, and pharmaceuticals — at risk of tariffs. However, the real impact could come indirectly through China, as it remains Australia’s largest trading partner.
“China surprised markets this week with another round of broad stimulus measures, and recent data on exports has been stronger than expected,” Robertson said. “The trade wars of 2018 showed that tariffs often hurt the country imposing them the most, so the timing and sequencing of these policies will be critical for the US economy.”
As for China’s fiscal expansion, Robertson warned that questions remain about the sustainability of such measures, though he noted they could provide support for the global economy through 2025.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
