Cash Rate Decision
Key Takeaways
The RBA has cut the cash rate by 25 basis points to 3.60 per cent, the second reduction in three months and the lowest level since March 2023.
Inflation within the target range, with headline at 2.1 per cent and the trimmed mean at 2.7 per cent, though productivity growth has slowed more than expected.
The labour market is softening, with unemployment up to 4.3 per cent, with GDP growth and productivity forecasts downgraded.
On 12 August 2025, the Reserve Bank of Australia (RBA) lowered the cash rate target by 25 basis points to 3.60 per cent, marking the second reduction in three months. The decision was unanimous and reflects the RBA’s assessment that inflation is now within its target range and that a modest easing of monetary policy will help support growth amid softening labour market conditions and weaker productivity forecasts.
Headline inflation eased to 2.1 per cent in the June quarter, while the trimmed mean measure slowed to 2.7 per cent, placing both comfortably within the RBA’s 2-3 per cent target range. The RBA noted that these results were in line with expectations, although productivity growth has been revised down, which could limit the economy’s potential output over the medium term. While the RBA is encouraged by the recent moderation in prices, it signalled a readiness to adjust policy should conditions change.
What Impacted the RBA’s Decision
The RBA Board cited a mix of global and domestic influences in its August move. Globally, financial markets remain optimistic despite persistent uncertainty around U.S. trade policy and geopolitical risks. Expectations of slower global growth continue to weigh on export prospects and business confidence in Australia.
Domestically, the pace of economic recovery is uneven. The unemployment rate has edged up to 4.3 per cent, reflecting a gradual softening in labour market conditions. While real household incomes have picked up and some indicators of financial stress have eased, pockets of weak demand persist in some sectors, limiting businesses’ capacity to pass on cost increases.
Moving Forward
The RBA assessed that inflation risks are now more balanced compared with earlier in the year but acknowledged that uncertainties remain around the trajectory of global demand, domestic consumption, and business pricing behaviour. While the recent rate cuts are expected to provide relief to borrowers, the full impact of monetary easing will take time to flow through the economy.
RBA Governor Michele Bullock reaffirmed the central bank’s dual mandate of price stability and full employment, noting that while monetary policy can support growth, addressing productivity challenges lies beyond the central bank’s direct control. The August decision saw a unanimous vote from all nine members, contrasting with the split decision in July, and comes alongside the RBA’s continued commitment to publishing an unattributed record of votes for transparency.
The RBA’s next monetary policy decision is scheduled for 30 September 2025. The REIV will continue to monitor developments closely and update members, as interest rate settings remain highly influential on borrowing power, investment activity, and mortgage servicing capacity across Victoria’s real estate markets.