Astonishing Aussie silver lining of Donald Trump’s stock market bloodbath revealed – here’s who will benefit

Australian home borrowers are now expected to receive their most generous rate cuts in more than a decade as Donald Trump’s tariffs stir recession fears.

The futures market now regards a super-sized 50 basis point rate cut in May as a 70 per cent chance, which saw the Australian dollar on Monday fall under 60 US cents for the first time in five years.

ANZ Bank is forecasting the Reserve Bank of Australia could cut interest rates by 50 basis points on May 20 – and slash rates further in July and August.

With February’s relief factored in, home borrowers could have had 100 basis points of rate cuts within six months.

That would take the cash rate back to 3.35 per cent for the first time since March 2023.

Three more cuts by August, on top of February’s relief, would mark the most generous relief in a such short time since 2012 when Australia introduced a carbon tax, and would be comparable to the Global Financial Crisis in 2009.

The cash rate would fall even faster than it did in 2019 and 2020 during the summer bushfires and the start of Covid.

The new forecasts comes after Treasurer Jim Chalmers warned the US tariffs had led to a ‘much more substantial risk’ of a recession.

‘We take seriously the warnings from economists around the world about the risk of a global recession,’ he said. 

Mr Chalmers remained optimistic about the Australian economy, despite the 30-day interbank futures market now regarding a 50 basis point rate cut on May 20 as a 70 per cent chance.

‘The next Reserve Bank interest rate cut in May might be as big as 50 basis points, so the Australian dollar is reflecting that,’ he said.

‘The market is expecting multiple interest rates cuts over the course of the year beginning in May.

‘We expect the economy to grow in welcoming and encouraging ways, but the risks are obvious and substantial and they’re laid out in the document too.’

The Treasurer’s department has released new analysis on the Trump tariffs, with beef exporters particularly at risk.

‘The effects on the Australian economy are expected to be modest, however, some parts of the agriculture, energy, mining and durable manufacturing sectors will be more adversely affected than others,’ it said.

ANZ’s head of Australian economics Adam Boyton said the Trump Administration tariffs could stop businesses from investing as Australian consumers cut back on spending.

‘The bigger risks for the Australian economy centre around the implications for global growth and both domestic consumer and business confidence,’ he said.

The Australian share market plunged again on Monday morning losing close to $180billion, as the benchmark S&P/ASX200 shed 6.4 per cent of its value in early trade.

Mr Boyton said the Reserve Bank was now more likely to embark on deep rate cuts, like it did during the GFC.

‘On the information at hand, the market reaction and past RBA responses to global shocks, more RBA easing now seems more likely than not,’ he said.

‘Indeed, ANZ Research would not rule out a 50 basis point cut in May, if sentiment sours and the global growth outlook deteriorates sufficiently.’ 

While the 10 per cent tariff on Australia is at the lower end of the Trump tariff scale, a 34 per cent tariff on China would have broad implications for global growth.

China, Australia’s biggest trading partner, is also the world’s biggest customer of Australian iron ore, the commodity used to make steel. 

A global slowdown would weaken Australia’s already strained economic growth.

‘For commodity exporters like Australia, it is typically the price of exports that adjusts to global growth shocks more than volume,’ Mr Boyton said.

This would weaken gross domestic product growth, based on the dollar value of the goods and services produced, factoring in volumes and prices.

‘That means nominal GDP growth will be softer even if real GDP growth is little changed,’ Mr Boyton said.

Of Australia’s Big Four banks, ANZ, Westpac and the Commonwealth Bank are now forecasting four rate cuts would have occurred in 2025.

This would take the cash rate from 4.1 per cent now to 3.35 per cent by Christmas.

But NAB, Australia’s biggest business lender, is expecting an extra cut in early 2026.

With February’s cut included, that would mean five cuts in total, taking the cash rate down to 3.1 per cent for the first time since February 2023.

The rate cuts to cope with Trump tariffs would be insufficient to undo the 13 RBA rate rises in 2022 and 2023. 

Canstar data insights director Sally Tindall, who was a federal Labor government advisor during the GFC, said rate cuts weren’t necessarily good news if the economy was in danger.

‘ANZ’s forecast might seem like music to a borrower’s ears, however, we need to be careful of what we wish for,’ she said.

Banks could also be reluctant to pass on RBA rate cuts in full if wholesale funding costs for them increase. 

‘There’s also no guarantee banks would pass on each of these cuts in full, particularly if they come racing in, one after the other,’ Ms Tindall said.