Chalmers: May cash rate cut ‘might be as big as 0.50%’

The treasurer’s comments come as billions of dollars of value continues to slide from Australian shares, with the ASX showing a 5% hit to Australia’s largest lender, the Commonwealth Bank.

Trade war tensions between China and the US - on the back of tariffs imposed last week by the Trump administration - are seeing significant knock-on effects for the Australian economy, with the value of the Aussie dollar slipping to below 60 US cents.

Speaking at a Sydney press conference, Mr Chalmers said the low dollar is largely down to concerns about the Chinese economy.

“Markets are expecting around four interest cuts in Australia this calendar year. There is more than 50% expectation in the market that the next Reserve Bank interest rate cut in May might be as big as 50 basis points.”

Mr Chalmers comments follow the release today of the Labor Party’s 2025 Pre-election economic and fiscal outlook.

Treasurer Jim Chalmers is confident global instability will not damage rate cut prospects domestically. Picture: Hilary Wardhaugh/Getty Images

“A dark cloud hangs over the global economy,” the outlook read. “When confidence craters, markets crash and that’s what we’ve seen as a result of the US administration’s self-defeating tariffs.”

While the outlook also said Australia is “better prepared and better placed than any other advanced economy” going into a period of heightened geopolitical tension, record global market falls are very concerning to the nation’s ability to control inflation.

The release of the next quarterly inflation update in three weeks’ time will give the clearest indication of the likelihood of a May rate cut.

The Reserve Bank of Australia kept the cash rate at 4.10% last week, its board confirming it will take a cautious approach in light of the tariffs.

This article first appeared on realestate.com.au and has been republished with permission.