Goldman Sachs Delays RBA Rate Cut to May Amid Political Uncertainty

Goldman Sachs has revised its expectations for the next interest rate cut by the Reserve Bank of Australia, pushing the anticipated date from next week to May. This decision is driven by uncertainties surrounding domestic political dynamics and the global trade outlook. The majority of analysts concur that the Reserve Bank of Australia will maintain the current cash rate of 4.1% during its upcoming meeting on Tuesday. This rate was last adjusted in March, marking the first reduction since November 2020.

The upcoming federal election in Australia, scheduled for May 3, is expected to be a closely contested event. Andrew Boak, the Chief Economist for Goldman Sachs in Australia, noted that the current polls indicate a tight race between the two major political parties. This uncertainty has led to the postponement of the rate cut, allowing the Reserve Bank to better assess the potential fiscal policy implications of the election outcome.

Boak also highlighted that the Reserve Bank will have more flexibility in its decision-making process before the release of key economic indicators, such as the U.S. tariff announcements on April 2 and the first-quarter Consumer Price Index (CPI) report on April 30. Despite the challenges, Boak acknowledged that the decision to reduce interest rates in April would be difficult, given the uncertain reaction mechanisms of the Reserve Bank and the recent weak monthly inflation and employment reports.

Boak further emphasized that delaying the rate cut could result in a delayed policy response from the Reserve Bank, making it more likely that rate cuts will occur later in the year, potentially in May, July, and August. This revised outlook reflects the broader economic uncertainties and the need for the Reserve Bank to navigate through a complex political and global trade environment.