Australia 200 afternoon report: 20 May 2025

The Australia 200 trades 50 points (0.60%) higher at 8345 as of 3.30pm (AEST).

RBA makes it decision

The Australia 200 (ASX 200) has recovered all of yesterday's 48 point loss and more, following a dovish 25 basis point (bp) interest rate cut from the Reserve Bank of Australia (RBA) this afternoon taking the cash rate to 3.85%.

Today's rate cut was widely expected and the second in an easing cycle that commenced in February and follows both trimmed mean and headline inflation in the first quarter (Q1) falling back to within the RBA's 2% - 3% target range.

Global uncertainties influence RBA outlook 

The RBA made note that despite the recent rollback of some tariffs and the subsequent rebound in financial market prices, 'there is still considerable uncertainty about the final scope of the tariffs and policy responses in other countries.' Combined with geopolitical uncertainties, they are expected to have an 'adverse effect on global economic activity, particularly if households and firms delay expenditure pending greater clarity on the outlook.'

The RBA struck a particularly dovish tone, noting it had 'considered a severe downside scenario and noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation in Australia.'

The last sentence of the statement which for so long has been inflation focussed 'The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome' was altered to reflect the more uncertain outlook. 'The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.'

Economic forecast revisions

Consistent with the dovish tones, the RBA revised its forecasts for trimmed mean inflation lower to 2.6% from 2.7% for year-end 2025. It also revised down its year-end gross domestic product (GDP) growth forecasts to 2.1% from 2.4% and the unemployment rate higher to 4.3% from 4.2% for year-end 2025.

Before the RBA's next Board meeting in seven weeks (Tuesday, 8 July), trade developments as well as the following data releases will be pivotal in determining whether the RBA cuts by 25bp to 3.60% in July or waits until August.

They are:

• Monthly consumer price index (CPI) Indicator for April (Wednesday, 28 May)
• Retail Sales for April (Friday, 30 May)
• Labour Force report for May (Thursday, 19 June)
• Monthly CPI Indicator for May (Wednesday, 25 June)

We hasten to add that the expiry of the 90 day pause on reciprocal tariffs is 9 July – just after the RBA's next board meeting.

Post the RBA's decision, the Australian rates market is pricing in 11 bp of a 25 bp rate cut for the July RBA meeting. A cumulative 56 bp of RBA rate cuts are priced between now and year-end.

Australia 200 stocks

Property sector

Following the RBA's dovish rate cut, the Australia 200 rallied 21 points from 8324 to 8345. Its gains today were supported by the interest rate-sensitive property sector.

• Lend Lease surged 2.36% to $5.64
• Goodman Group added 1.41% to $32.08
• Dexus rose 1.06% to $7.16

Banking sector

A similar story for the big banks as:

• Macquarie gained 2.22% to $208.50
• Australia and New Zealand Banking Group rose 2% to $28.97
• National Australia Bank lifted 1.47% to $37.38
• Westpac added 0.73% to $31.60
• Commonwealth Bank of Australia hit a fresh record high of $173.54 before easing to be trading 0.31% higher at $171.91

Australia 200 technical analysis

From its mid-February record high of 8615, the Australia 200 fell 16.78% to its early April 7169 low, a move which had more corrective than impulsive characteristics.

After rebounding from the April low to within 2.5% of its record high, and despite recent developments on the trade front, our preferred scenario remains for a period (weeks) of consolidation/range trading. This will likely be in a higher range (8400 - 7950) than what we suggested at the end of last month (8200 - 7730ish).

Australia 200 daily chart

• _{Source: TradingView. The figures stated are as of 20 May 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}