SYDNEY — The Reserve Bank of Australia (RBA) has finally loosened its grip on the economy, slashing the cash rate by 0.25 percentage points to 3.85%—only the second cut since 2020. Governor Michele Bullock, speaking at a press conference on May 20, 2025, framed the move as a reluctant nod to easing inflation pressures, but her guarded tone suggests the RBA is more comfortable tinkering with markets than letting them breathe. Meanwhile, the shadow of U.S. President Donald Trump’s erratic tariff policies looms large, threatening to upend Australia’s economic stability and exposing the limits of central bank control.
The rate cut comes after years of economic turbulence: a pandemic-induced shutdown, a 50-year-high inflation spike, and a cost-of-living crisis that’s left households gasping. With inflation now receding—headline figures hit 2.8% in the September 2024 quarter, per the Australian Bureau of Statistics—the RBA claims it’s delivering “relief” to mortgage holders. But don’t pop the champagne yet. Bullock was quick to dampen hopes of further cuts, insisting the bank needs “more data” before acting again. Translation: the RBA’s bureaucrats will keep their fingers on the economic throttle, ready to choke growth at the first sign of trouble.

Trump’s trade war, the wild card in this saga, has markets on edge. His initial tariff blitz—125% on Chinese goods and 10% on others—sent the ASX200 tumbling nearly 15% from its February peak and wiped billions off global markets. A last-minute 90-day pause on most tariffs (China excluded) sparked a temporary rally, with the ASX200 jumping 4.5% and the Aussie dollar clawing back to US61.5c. But Bullock, ever the cautious central planner, warned of “ongoing uncertainty” as countries scramble to respond to Trump’s protectionist gamble. “It’s too early to determine the path for interest rates,” she told the Chief Executive Women’s dinner in Melbourne, dodging commitment like a seasoned politician.

Economists are less reserved. Deutsche Bank’s Phil O’Donaghoe, who briefly predicted a 50-basis-point cut in May, now expects a standard 25-basis-point trim, with the cash rate potentially hitting 3.1% by early 2026. NAB, bolder still, forecasts a supersized cut to counter Trump’s economic wrecking ball, projecting rates as low as 2.6% by mid-2026. Such moves could save homeowners $181 monthly on a $600,000 mortgage, per Canstar’s Sally Tindall—but only if the RBA stops overthinking every data point. Libertas Ezine readers know better: central banks thrive on control, not clarity.

The real kicker? Trump’s tariffs aren’t just a U.S. problem. Australia’s reliance on China—our top trading partner—means a slowdown there could slash demand for our exports, from iron ore to beef. Richard Holden, a professor at UNSW Business School, notes that sliding share prices reflect businesses bracing for weaker sales to China. Yet Bullock remains fixated on “monitoring” rather than acting, as if households and firms can afford to wait for her epiphany. “We’re watching how this uncertainty affects decisions by households and businesses,” she said, as if Australians aren’t already tightening belts.

For Libertas readers, the lesson is clear: government meddling—whether Trump’s tariffs or the RBA’s rate rigging—distorts markets and punishes the productive. The RBA’s cut is a half-hearted gesture, overshadowed by Bullock’s obsession with “stability” over freedom. As global trade frays and inflation lingers, Australians deserve less central bank caution and more room to innovate, invest, and thrive. But with Bullock at the helm and Trump stirring chaos, don’t hold your breath for either.
Sources: Australian Bureau of Statistics, The Guardian, Sydney Morning Herald, Yahoo Finance