The Reserve Bank of Australia’s (RBA) decision to hold the cash rate steady at 3.85 per cent has sparked frustration across the nation’s mortgage belt and reportedly surprised even the Treasurer, Jim Chalmers.
Political and market surprise
“It’s not the result millions of Australians were hoping for or what the market was expecting,” Chalmers told the media shortly after the announcement, acknowledging the public disappointment.
Former RBA assistant governor and now Westpac chief economist Luci Ellis also described the central bank’s move as “surprising,” in her comments to the ABC.
The six-to-three majority decision by the RBA Monetary Policy Board caught many observers off guard — including Ellis, who had initially forecast a rate cut in August. But after the Australian Bureau of Statistics released weaker-than-expected inflation data two weeks ago, she revised her view to July.
“I had initially leaned toward August because I thought the Board might hold off, not fully factoring in the latest data set,” she told the ABC.
“But after seeing the soft inflation numbers, it seemed clear the conditions for a July cut were there.”
Bullock’s conservative strategy
However, tax law expert, economics writer, and Neos Kosmos contributor Tony Anamourlis believes the surprise expressed by Chalmers and others is misplaced.
“Reserve Bank Governor Michele Bullock was cautious and did the right thing,” Anamourlis said.
“She [Bullock] had to consider the climate of lingering inflation and global economic risk.”
Bullock’s tone, he added, may appear conservative — “some say overly so” — but her strategy is grounded in “hard economic reasoning, not political optics.”
While headline inflation may be easing, “services inflation remains sticky,” Anamourlis noted, pointing to persistent demand-side pressures from wage growth and resilient consumer spending.
“Declaring victory too early risks undoing the gains made,” he said.
Bullock’s caution reflects the reality of when she assumed leadership of the RBA — amid institutional overhaul and heightened scrutiny.
“Credibility matters,” Anamourlis added. “A premature pivot could not only reignite inflation but also damage confidence in the central bank’s inflation-fighting mandate.”
Chalmers’ reaction, he said, highlights a fundamental “tension between political needs and monetary independence.”
RBA conservativism may not mark the end of a honeymoon, Anamourlis said, but it “does take some of the shine off Labor’s monumental electoral victory” of May 3, 2025.
Greek Australian small to medium business calls for relief
The government faces pressure to relieve households and small businesses, but “the RBA is tasked with long-term stability,” Anamourlis added.
According to Anamourlis, consumer confidence has already been battered by cost-of-living pressures, stagnant real wages, housing unaffordability, and global volatility.
“Holding rates steady doesn’t worsen these — it prevents them from getting worse,” he said.
“No hike is a form of relief. The disappointment some feel reflects unmet hopes for a rate cut, not a deterioration in fundamentals.”
Fotini Kypraios, Managing Principal of the Hellenic Australian Chamber of Commerce and Industry (HACCI), on the other hand, told Neos Kosmos that Greek Australian small and medium businesses had hoped for relief.
“The RBA’s conservative stance, and the Treasurer’s surprised response, have only deepened uncertainty,” she said.
“HACCI calls for a more balanced approach — one that controls inflation without sidelining the needs of the economy and the SME business backbone that supports it.”
Sustaining confidence is difficult
Commentators like Ellis have warned that the RBA’s decision might further dampen already fragile consumer sentiment, which only began to recover after a previous rate cut ended a long stretch of increases.
Asked if this was an overly pessimistic assessment, Kypraios disagreed.
“No, it’s not too pessimistic — there was a glimmer of optimism that a rate cut might signal the beginning of some economic relief,” she said.
“Instead, the decision has stalled that momentum.”
“In retail, hospitality, and services — where sentiment drives spending — the impact will be immediate. When consumers feel uncertain, they hold back. Business sentiment has shifted from hopeful to cautious once again.”
Anamourlis, however, stressed that sentiment isn’t uniform.
“Savers and retirees benefit from higher rates,” he said. “Predictability from the RBA could, in fact, support confidence in the medium term.”
Kypraios agreed that Bullock’s caution is “understandable given global uncertainty,” but warned that it “risks dampening local confidence.”
“The SME sector can’t afford to wait for clarity from overseas before making decisions locally,” she said.
“Business needs consistency and a clear path forward.”
Whether the RBA and Bullock are, as Anamourlis said, “playing a forward-looking game,” or as Kypraios suggested, being overly cautious, will be debated.
But what is certainly hoped for — by the Treasurer and especially by Greek Australia’s small to medium business community — is that the RBA does not err on the side of caution in its August meeting and does offer a rate cut.
A pall of mild pessimism now blankets the business community as many struggle to stay above water.
