Australia’s weak economic growth reinforces expectations of further RBA rate cuts

Australia’s economic growth slowed in the first three months of this year, reinforcing the case for the country’s central bank to ease monetary policy further. Government data showed that GDP advanced 0.2% in the first quarter, weaker than the forecasted increase of 0.4%. The economy grew by 1.3% from a year earlier, with analyst expecting a 1.5% gain, Bloomberg reports.

Katherine Keenan of Australian Bureau of Statistics says extreme weather events weighed on exports and domestic final demand. Treasury estimates that the immediate loss to economic activity from natural disasters in 2025 will be 2.2 billion Australian dollars ($1.4 billion).

Meanwhile, the Reserve Bank of Australia’s (RBA) baseline scenario sees GDP growth picking up to 2.1% by December, driven by increased household spendings due to lower borrowing costs. Market participants estimate the probability of monetary easing at the central bank's July meeting at 90%. Additionally, traders expect RBA rates to be at around 3.1% at year’s end.