It’s Wednesday the 21st of May 2025, and the Reserve Bank cuts interest rates, the federal Liberal and National parties split and Telstra lifts the prices of some phone plans. Plus, Rio Tinto continues its push into lithium, and Netflix saves Sesame Street.

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News in brief

The Reserve Bank board debated a 50-basis point cut in interest rates ahead of announcing a 25-basis point drop yesterday afternoon. The central bank highlighted that the Australian economy is sluggish, with households particularly cautious.

The Liberal Party will be the opposition party in the federal parliament, and there will be no coalition involving the National Party, after a breakdown in negotiations over nuclear energy, supermarkets and regional funding policies.

Telstra will raise the prices of most of its phone and internet plans by between $3 and $5 per month from July 1 as it tries to boost earnings and invest more in infrastructure.

Rio Tinto continues to push beyond iron ore, investing $1.4 billion in a Chilean lithium producer. Rio has targeted lithium, used in batteries, in its efforts to diversify away from iron ore and aluminium. It has already bought into projects in Argentina and Australia.

Sesame Street and Netflix have struck a deal that will see the popular TV show appear on the streaming platform, after US President Donald Trump pulled funding for the free-to-air channel PBS.

Fear-o-meter

Reading between the lines of a Reserve Bank statement after a board meeting is a fine art, practised by market economists looking for any hint of the next move in interest rates.

The gist of the economists' commentary yesterday was that the RBA is now less worried about inflation and more focused on the risks to economic growth.

The central bank said inflation is heading to the target band midpoint of 2.5 per cent, and monetary policy is “less restrictive” after yesterday’s rate cut. That means it is still restrictive, meaning there is latitude to cut again.

Governor Michele Bullock spoke yesterday about households not responding to an increase in real wages this year, and uncertainty around the tariff war. It looks like there are more rate cuts to come.

Who's talking today?

"We'd previously been expecting two further rate cuts, taking the cash rate down to about 3.35%. We still think that's the level they'll cut to, but we have brought forward slightly our expectation of when that will occur. So we previously thought we'd see one rate cut in August and another one in November, following each of the major quarterly CPI releases. We now think there's a case to move a little more quickly towards neutral. So we're now expecting a rate cut in August and September. And I think there is a risk that it could even come a little earlier than that."

Greed-o-meter

The big four banks announced very quickly they'd be passing on the interest rate cut to customers. Here's how the new best variable rate from each lender stacks up, compared to the lowest in market (which has already come into effect).

Source: mozo.com.au as at 20 May 2025 - lowest variable rates offered by the Big 4 banks and the leading rates on the Mozo database across all variable rate owner occupier home loans. Based on a $500,000 home loan size, 25 year loan term, excluding refinancing offers.                     

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