The Reserve Bank of Australia has lowered interest rates for the third time this year, bringing the cash rate down by 0.25 percentage points to 3.6 per cent. The new rate means the RBA has cut rates by 0.75 percentage points so far in 2025, the largest reduction since the peak rate cycle ended in late 2023.
RBA Cash Rate Cuts in 2025
The board made the announcement following its August meeting, noting inflation has continued to ease and the job market is showing less tightness. The board now expects to move on a gradual schedule of additional cuts, but it will wait on new data and keep an eye on both global and local economic uncertainties.
Inflation Falls Back Within Target Range
Trimmed mean inflation for the June quarter slowed to 2.7 per cent, landing squarely in the RBA’s target band of 2 to 3 per cent. Headline inflation dropped to 2.1 per cent, in part because of temporary cost-of-living relief measures.
Australia’s central bank just pulled the trigger on its first interest rate cut since 2020. This move marks a sharp high inflation alarms of 2022. The Reserve Bank points to the stack of rate hikes earlier this cycle for cooling demand, plus some relief in global supply chains. Updated forecasts show inflation should nestle neatly within the bank’s comfort zone for the next year, which clears a cautious runway for more rate drops ahead.
Jobs Market Slowing, but Not Weak
June’s unemployment rate ticked up to 4.3 per cent, and the average for the June quarter settled at 4.2 per cent. That’s still a low reading, but it does show the jobs market is losing some of its earlier heat.
Businesses are saying it’s easier to find workers now compared to earlier in the year, though pay rises are still outpacing productivity. The RBA noted a sharper dip in spending could push unemployment higher, but stronger household income and net worth might boost demand again.
What Markets Are Saying
Traders had banked on this cut, pushing the Aussie dollar briefly under 65 US cents right after the news.
Governor Michele Bullock said the RBA’s plan is a steady lowering of rates, moving in step with incoming data but keeping a buffer for any global surprises. Analysts now pencil in at least one more cut before December, with November looking like the hottest candidate.
If you own a home or are thinking of buying one, this rate cut gives you more borrowing power. You can now get larger loans or keep your repayments lower than before. Existing homeowners stuck on higher fixed or variable rates can refinance now, which could save them thousands over the life of the loan.
Investors can tap into home equity at a cheaper rate to buy more properties or grow their portfolios. First-time buyers will also find more homes within their budget because the lower repayments stretch their borrowing capacity.Still, mortgage brokers remind us that a lower rate is just one piece of the puzzle. It’s still vital to choose the right repayment plan, the right loan term, and features that give you flexibility. Doing so can lead to bigger long-term savings. OM Financials can assist with interest rate management, refinancing, and innovative financial strategies. Our mortgage brokers work tirelessly to alleviate your financial burden by securing better loan terms through tailored solutions. Contact us at 478 876 967 or schedule your free consultation and begin managing your mortgage loans.