There is a growing list of economic indicators pointing to stronger growth in consumer spending and sentiment, dwelling construction, business confidence and exports. These more favourable trends have been positively influenced by falling inflation and solid wages growth.
The Reserve Bank of Australia has delivered its third interest rate cut of 2025, trimming the cash rate by another 25 basis points. Since the start of the year, cumulative rate reductions have begun to pack more of a punch — and the RBA hopes this momentum will help bolster economic growth and prevent unemployment from climbing too far.
Confirmation of on-target inflation and further evidence of a sluggish pace of economic growth was not enough for the RBA to lower interest rates at its 8 July meeting. It surprised economists and the market, leaving official interest rates at 3.85 per cent, just 50 basis points down from the peak. A 25 basis point cut was expected and priced into markets.
The Reserve Bank of Australia surprised markets and economists alike this month by holding interest rates steady, despite clear signs that inflation is returning to target levels. The decision, announced on 8 July, came as a surprise to many who had expected a rate cut, given the recent softening in inflation data. In short, the direction of rates hasn’t changed – but the timing has. The market still anticipates rate cuts later in the year, just not as soon as originally expected.
The moderate pick up in house prices in recent months is linked to a stalling in the growth of new supply, with new listings for sale falling and immigration inflows above official forecasts in the March quarter 2025. The resilient strength in the labour market has, for now, helped to support the housing market which has been further assisted by the early effects of lower interest rates.
Given current economic conditions, there is near unanimity that the RBA will resume its interest rate cutting cycle on 20 May with further interest rate cuts expected over the following 12 months. Low inflation, a soft economy and signs of a weakening in the labour market are all factors that has markets pricing in a cash rate below 3 per cent in the first half of 2026, down from the current 4.10 per cent.
Global investors and policy makers continue to assess the extent of the negative impact of US President Trump’s tariff policies. It is likely to remain a moving feast in the months ahead with some retaliation and adjustments to the tariff plans seemingly inevitable. One thing where there is unanimity is the effect of the tariffs – negative for international trade and global economic growth. The major uncertainty is the extent of the fallout.
The impact of the budget on macroeconomic conditions is broadly neutral, which was confirmed with the muted reaction in financial markets to the budget. The pre-conditions are in place for the RBA to deliver further interest rate cuts but the timing of the next rate reduction is, at this stage, open.
Despite the RBA commentary, financial markets are continuing to price in further interest rate cuts with a cash rate of approximately 3.40 per cent factored in by the first half of 2026. Softer economic data out of the US in recent weeks has helped reinforce the market pricing for lower interest rates.
The important news in the first month of 2025 centred on a further sharp deceleration in inflation, the full pricing in of a series of interest rates cuts from the RBA and the start of the Trump Presidency in the US.
The other major issue to unfold in Australia is falling house prices at a national level, but it remains the case that market conditions are uneven from city-to-city…
There is a growing list of economic indicators pointing to stronger growth in consumer spending and sentiment, dwelling construction, business confidence and exports. These more
The Reserve Bank of Australia has delivered its third interest rate cut of 2025, trimming the cash rate by another 25 basis points. Since the
Confirmation of on-target inflation and further evidence of a sluggish pace of economic growth was not enough for the RBA to lower interest rates at
The Reserve Bank of Australia surprised markets and economists alike this month by holding interest rates steady, despite clear signs that inflation is returning to
The moderate pick up in house prices in recent months is linked to a stalling in the growth of new supply, with new listings for
Given current economic conditions, there is near unanimity that the RBA will resume its interest rate cutting cycle on 20 May with further interest rate
Global investors and policy makers continue to assess the extent of the negative impact of US President Trump’s tariff policies. It is likely to remain
The impact of the budget on macroeconomic conditions is broadly neutral, which was confirmed with the muted reaction in financial markets to the budget. The
Despite the RBA commentary, financial markets are continuing to price in further interest rate cuts with a cash rate of approximately 3.40 per cent factored
The important news in the first month of 2025 centred on a further sharp deceleration in inflation, the full pricing in of a series of
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Zagga Market Pty Limited (Australian Credit Licence 490904) ACN 611 662 401 acts as the Servicer of loans acting on behalf of the credit provider, Zagga Investments Pty Limited (AFSL 492354) ACN 615 154 786, trustee of the Zagga Investments Lending Trust
All portfolio numbers quoted correct as at 1 July 2025.
*Average investor return across the active portfolio as at 1 July 2025.
**Target return is after expenses and any applicable management fees for the year ended 30 June 2025. OCR = Australian Reserve Bank Official Cash Rate.
Past performance is not a reliable indicator of future performance and investments are subject to investment risk, fees and costs. Returns are not guaranteed.
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