Cash Rate Decision
Key Takeaways
Cash Rate Unchanged: The Reserve Bank of Australia (RBA) has maintained the cash rate at 3.60 per cent, following a 25-basis point cut in August. This decision aligns with market expectations.
Inflation Concerns: The RBA noted that inflation in the September quarter could exceed expectations due to stronger-than-anticipated economic activity.
The labour market is broadly steady, with the unemployment rate unchanged at 4.2 per cent in August. This ongoing strength in employment has contributed to the RBA's decision to hold rates steady.
On 30 September 2025, the Reserve Bank of Australia (RBA) held the cash rate target at 3.60 per cent, following a 25-basis-point cut in August 2025. A combination of domestic and global factors influenced the RBA's decision. Domestically, the labour market remains resilient, and economic activity has been stronger than expected. However, the RBA expressed caution due to potential inflationary pressures and the need to continue assessing the full impact of previous rate cuts.
Headline inflation remains at 2.1 per cent as of the June quarter, while the trimmed mean measure is static at 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. While economic growth is recovering, the domestic and global outlooks appear uncertain. The RBA remains attentive to the data, and evolving assessments will continue to guide its decisions.
What Impacted the RBA’s Decision
The RBA Board cited a mix of global and domestic influences in its September move. Globally, financial markets remain optimistic despite persistent uncertainty surrounding U.S. tariffs and other geopolitical risks, as trade policies are expected to have an adverse impact and continue to pose a threat to the global economy.
Domestically, the pace of economic recovery is improving more rapidly than anticipated. The unemployment rate remained at 4.2 per cent, unchanged from August. While real household incomes have increased and measures of financial conditions have eased, private consumption has picked up. Accordingly, the housing market has strengthened, reflecting the impact of recent rate decreases.
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. With recent rate cuts providing relief to borrowers, it is expected that businesses will pass on cost increases to relieved households, leading to higher labour demand.
RBA Governor Michele Bullock reaffirmed the central bank’s dual mandate of price stability and full employment, noting that while inflation may be persistent in some areas and labour market conditions are stable, it was appropriate to retain the cash rate. The September decision received a unanimous vote from all nine members, aligning with August and contrasting with the split decision in July. This decision 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 4 November 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.