RBA Cash Rate Cut To 3.60%

Why Did The RBA Cut The Cash Rate In August 2025?

The RBA lowered the cash rate by 25 basis points to 3.60% in a unanimous decision, marking a total reduction of 75 basis points since the start of the year. The move comes as inflation continues to moderate and labour market conditions ease slightly.

In the June quarter, trimmed mean inflation fell to 2.7% over the year, broadly in line with the RBA’s May forecast. Headline inflation was 2.1%, partly due to temporary cost-of-living relief. Updated staff forecasts see underlying inflation settling around the midpoint of the 2–3% target range, assuming the cash rate continues to ease gradually.

Key factors behind the decision:

• Global developments: More clarity on US tariffs and policy responses abroad has reduced the risk of extreme scenarios, but trade tensions are still expected to weigh on global growth.
• Domestic conditions: Household incomes are rising, private demand is recovering, and some financial conditions have eased. However, certain sectors report that weak demand is limiting their ability to pass on cost increases.
• Labour market trends: Unemployment averaged 4.2% in the June quarter, up from earlier lows but still consistent with a relatively tight labour market. Wages growth has eased, productivity remains weak, and unit labour costs are still high.
• Risks to demand: Consumption could grow more slowly than forecast, weighing on jobs, or households could spend more than expected as incomes and wealth rise.
• Lag effects: The impact of earlier rate cuts is still flowing through the economy, particularly for business pricing and wages.

The Board said it will watch the data closely and adjust policy if needed.

Our Experts Take On The Board's Decision

Here is what our experts say about the cash rate decision and what it means for borrowers.

This is a signal that the RBA’s seen enough data to confirm it needs to support a weakening economy.

For borrowers, it’s a psychological green light to buy homes and we’ve already seen a rush of pre-approvals as people anticipate more cuts. It takes time for people to switch from fear to FOMO, so we expect the property market to get heated later this year.

Otto Dargan, CEO of Home Loan Experts

One cut down, two to go.

The RBA is reacting to the bond market’s lead here, not driving sentiment. Fixed rates have been hinting at this move for weeks. We’re expecting cuts over the rest of the year to catch up with the dropping CPI and weakening Australian economy.

Borrowers who lock in now might regret it by Christmas. The real story will be how quickly the RBA makes another cut. Variable is the play most are choosing, unless you need certainty.

Jonathan Preston, Senior Mortgage Broker

How The RBA Cash Rate Affects Interest Rates

Lenders add a margin to the official cash rate to determine the variable interest rate they offer to customers.

When the RBA raises the cash rate, lenders often increase their variable interest rates. This means your mortgage repayments go up.

When the RBA cuts the cash rate, lenders may lower interest rates. So, your repayments could go down. However, note that not all lenders pass on the full change.

If the cash rate is unchanged, your repayments usually stay the same. However, lenders can still change rates for other reasons.

Use our rate change calculator to find out what your repayments should look like whenever the cash rate changes.

Upcoming RBA Monetary Policy Board Meeting Calendar 2025

Source: rba.gov.au