Policy and messaging focus →

RBA rate cut: a narrative shift for Labor, but not a game-changer 

The RBA’s first interest rate cut in more than four years has provided Labor with a much-needed boost. The decision to lower the cash rate from 4.35 per cent to 4.1 per cent lets the government argue that inflation is under control and that its economic management is working. Treasurer Jim Chalmers wasted no time framing the cut as evidence that “the worst of the inflation crisis is over”. The fact that the big four banks immediately passed the cut on to mortgage holders helps reinforce the narrative that relief is finally coming for Australian households. 

However, the broader impact may be limited. RBA Governor Michele Bullock made it clear that this was a one-off adjustment rather than the start of an easing cycle. Further rate cuts are unlikely in the near future, with markets now expecting just one more cut in July and no further moves until 2026. In essence, it was a smart decision from the board, who walked a fine line between both sides of politics. Whichever decision it made could have been interpreted as political (cutting rates would boost Labor, while leaving them steady would help the Coalition). In the end, it threw both sides a bone. 

This means that while the rate cut allows Labor to shift the economic narrative temporarily, it is unlikely to transform voter sentiment. The cut will provide modest relief — roughly A$77 a month for someone with a A$500,000 mortgage — but the broader cost-of-living crisis remains, with housing affordability, rising grocery prices, and wage stagnation continuing to weigh on voters’ minds.