The Reserve Bank of Australia (RBA) has signaled that more interest rate cuts could be on the way, as it works to balance inflation and employment in the current economic climate.
Monetary Policy Outlook
At its August meeting, the RBA lowered the cash rate target by 25 basis points to 3.6 per cent — the lowest level since May 2023. Meeting minutes revealed that further reductions in the cash rate over the coming year are considered likely, with the goal of supporting full employment while returning inflation to the midpoint of the 2–3 per cent target range.
While the board acknowledged that financial conditions have eased since the beginning of the year, it also described monetary policy as still “somewhat restrictive.” Importantly, there was no discussion of larger cuts beyond 25 basis points, with attention focused instead on the pace of future easing.
When Could the Next Cut Happen?
The RBA indicated that future rate cuts will likely take place gradually, influenced by several key factors. Labour market conditions remain tight, and inflation is projected to stay slightly above the target midpoint in the medium term. However, if employment conditions ease more than expected or downside risks emerge in the global economy, the pace of reductions could accelerate.
Global uncertainty remains a factor, though risks have moderated somewhat in recent months. The central bank highlighted the importance of monitoring both domestic employment trends and international economic developments before moving more aggressively.
Inflation and Housing Market Trends
The RBA noted that underlying inflation has been easing in line with expectations and is forecast to hover around 2.5 per cent over the coming years, assuming a gradual path of cash rate reductions. Headline inflation may temporarily rise to around 3 per cent in the second half of 2025 before settling closer to the target midpoint.
On the housing front, property prices have been moving within the expected range for an easing cycle, with dwelling investment showing early signs of recovery. This suggests that lower interest rates are beginning to flow through to the housing market.
What This Means Moving Forward
Overall, the minutes suggest that the RBA is shifting its focus slightly, giving more weight to labour market risks while remaining committed to controlling inflation. The path of rate cuts will depend on upcoming economic data, particularly employment figures and global conditions.
For homeowners, buyers, and investors, this means that borrowing costs could continue to ease into next year. However, the timing and scale of cuts will remain data-dependent, creating both opportunities and uncertainties in the months ahead.
Looking Ahead
As the RBA carefully weighs inflation and employment, more rate cuts appear likely — but patience will be required. Those considering refinancing, entering the property market, or making investment decisions may benefit from exploring how potential changes in the cash rate could affect their financial plans.
If you’re wondering how possible rate cuts could impact your mortgage or future borrowing plans, now is the time to seek advice. Reach out today to explore your options and prepare for the opportunities ahead.