In Bendigo Bank’s latest economic update, delivered following the release of quarterly gross domestic product (GDP) data, Robertson flagged a range of pressures facing the domestic economy – including flat productivity, climate-related disruptions and global trade uncertainty.
“The latest data suggests the economy still needs support and warrants less restrictive interest rates, with real GDP growth of only 0.2 per cent in Q1, equating to 1.3 per cent growth year-on-year,” Robertson said.
“While the economy is still growing, once again our productivity rate failed to lift, down 1 per cent over the year, giving the returned ALP government a timely reminder of the imperative of addressing this long-standing issue of underperforming productivity – the primary driver of lifting standards of living.”
The GDP figures revealed a steep decline in public sector spending, although private investment has lifted by 0.75 per cent.
Extreme weather events have impacted mining, shipping and tourism – a disruption Robertson linked to rising climate risks. “It served as a timely reminder on World Environment Day of the impact of climate change on the economy,” he said.
Looking ahead, Robertson forecast that GDP growth will gradually increase in FY2025–26 to nearly 2 per cent. However, he warned that droughts in southern Australia and recent flooding in NSW could complicate this path.
Turning to monetary policy, Robertson outlined expectations that the RBA will cut the cash rate twice more in 2025 – by 25 basis points per quarter – and may deliver another cut in 2026, bringing the rate to a neutral 3.1 per cent.
“As the RBA puts global factors such as trade wars firmly in its sights, we can expect to see two more cash rate cuts this year,” he said.
“Had US tariffs remained at the shocking levels proposed in early April, we would have seen a half a per cent cut by the RBA in May.
“But the deferral of the tariffs for most countries and a degree of de-escalation with China meant the RBA could cut by the standard 0.25 per cent and keep more firing power for the uncertain path ahead.”
Robertson further noted that equity markets responded favourably: “Our stock market has taken comfort in the outlook for more RBA rate cuts ahead and our lower exposure to trade wars than elsewhere has taken the ASX 200 to within 1 per cent of the record high set back in February.”
Commenting on global developments, the chief economist highlighted that US tariffs are now near the levels seen in the 1930s – a period he called “the worst decade economically in modern history”.
“The fact that US tariffs are now ‘only’ around 14 per cent compared to double that number threatened on 2 April is good news,” Robertson said.
Still, the future remains uncertain. “Where tariffs end up from here is anyone’s guess, but central banks and economists are universal in their expectation that the trade wars will mean lower growth rates ahead, and so lower interest rates,” he said.
“Those countries that are imposing tariffs will add inflation to their economies and so may limit the extent of their rate cuts.”
While financial markets have welcomed the partial rollback of US tariffs, Robertson cautioned that risks remain as markets still hold concerns around US stagflation risks and rising bond yields.
“[V]olatility on the markets is likely to remain elevated,” he added.
