Sydney, August 12, 2025
The Reserve Bank of Australia (RBA) has delivered its third interest rate cut this year, lowering the cash rate from 3.85% to 3.60%. This marks the lowest level since March 2023, signalling a shift towards more accommodative monetary policy as inflation eases and economic growth slows.
RBA Governor Michele Bullock explained that headline inflation has dropped to 2.1%, with underlying inflation (trimmed mean) at 2.4%, bringing price growth back within the bank’s target range. At the same time, the economy is showing signs of strain — unemployment has edged up to 4.3% and consumer spending remains subdued.
Why the Rate Cut Matters
For homeowners and businesses, the move brings much-needed financial breathing space. Major banks, including Commonwealth Bank, Westpac, ANZ, NAB, and Macquarie, have already confirmed they will pass the full rate cut onto variable-rate mortgage customers. This could save an average homeowner with a $700,000 mortgage around AUD 1,100 annually.
For businesses, lower borrowing costs may encourage investment and expansion, potentially boosting employment and productivity in the months ahead. However, for savers, the cut means reduced returns on deposits and term investments.
What’s Next?
The RBA has signalled that further rate cuts are possible later this year, depending on economic conditions. Economists suggest the cash rate could drop to as low as 3.25% if inflation continues to slow and economic momentum remains weak.
While the rate reduction is aimed at supporting growth, the central bank has also warned about long-term challenges — including sluggish productivity growth and limited wage increases — that could dampen Australia’s economic recovery.
Key takeaway: Borrowers can expect relief, but Australia’s broader economic health will depend on whether this stimulus translates into stronger investment, job creation, and consumer confidence.
