The Reserve Bank of Australia (RBA) has reduced the official cash rate to 3.60 per cent, its lowest level in over two years, following the third 25-basis-point cut of 2025. This move follows earlier cash rate reductions in February and May of the year. The cut was unanimously approved by the RBA board and was widely expected—after July’s surprise “on-hold” decision.
Unanimous Decision from the RBA Board
The RBA’s Monetary Policy Board voted unanimously for the cash rate cut, citing consistent progress in bringing inflation within its 2–3 per cent target range and slightly softer labour market conditions.
Governor Michele Bullock emphasised that while forecasts point to a possible need for lower cash rates in the future, the board will remain data-driven in its approach. “Monetary policy remains well positioned to respond to any shocks,” she said.
Treasurer Welcomes Inflation Progress
Treasurer Jim Chalmers described the decision to lower the cash rate as evidence of Australia’s progress in managing inflation amid global uncertainty. The RBA’s post-meeting statement echoed this, highlighting easing inflation and the need to support economic activity with a more accommodative cash rate policy.
Industry Leaders Applaud the Move
Industry leaders in the finance and mortgage sector have welcomed the cash rate cut, highlighting its potential benefits for borrowers. Peter White from the Finance Brokers Association of Australia noted that a lower cash rate will help more Australians access funds for purchases or refinancing, while Anja Pannek of the Mortgage and Finance Association of Australia urged lenders to pass on the full reduction, given that mortgage repayments remain the largest expense for many households. Mark Haron from Connective added that although the cut is not a complete solution, it provides both financial and psychological relief for families.
Economic Outlook & Productivity Concerns
The RBA has downgraded its GDP growth forecast for 2025 to around 1.7% (down from 2.1%), while unemployment is expected to remain steady at 4.3%.
Significantly, the RBA has slashed its productivity growth assumption to just 0.7% per year, down from 1%, signaling a longer-term drag on Australia’s growth prospects. Policy reform, particularly to boost business investment and reduce regulatory hurdles, is now more critical than ever—especially in a lower cash rate environment.
Industry Response & Customer Impact
The latest cash rate cut has ignited a spike in mortgage refinancing activity, with one broker noting a 22% increase in inquiries. Canstar estimates that refinancing at a lower cash rate could trim over $76,000 in lifetime interest for borrowers paying more than minimum repayments.
What’s Next for Borrowers?
With the next RBA meeting slated for late September and another cash rate cut expected by November (potentially bringing the rate down to 3.35%), this easing cycle may not be over yet. Monitoring upcoming jobs, inflation, and productivity data will be key to understanding future cash rate movements.
Final Thoughts
Borrowers and homeowners may find themselves with greater borrowing capacity and lower mortgage stress as a result of the reduced cash rate. However, with ongoing shifts in productivity and economic momentum, the path forward warrants careful navigation. A mortgage broker can help assess how these evolving conditions and changes in the cash rate affect individual borrowing options, negotiate with lenders, and secure a more favourable deal.
Take the first step today—reach out today to review your current loan and uncover potential savings.