Australian 3-Year Bonds

Australia’s wage growth was stronger than expected in the first three months of 2025, highlighting the nation’s tight labour market, underpinned by a wave of public-sector hiring. However, the data did little to change market expectations for an interest-rate cut on Tuesday, but the potential for an outsized 0.5% has become a distant memory – we said no chance at the time. Slowly but surely, markets have become more realistic and less dovish. However, we still see room for disappointment if Michele Bullock only cuts twice, as opposed to three times this year – the RBA governor has adopted a cautionary tone throughout 2025, and we see no clear reason why she will adopt a more dovish stance tomorrow.

• We believe the RBA will cut rates 0.25% tomorrow and a few times this year, potentially lowering the official cash rate to 3.35%.