By Tim Findlay
The Reserve Bank’s decision to cut the cash rate by 0.25% to 3.60% in August 2025 was widely expected. Inflation has eased back into the 2–3% target range, the labour market has softened slightly, and financial conditions have loosened after earlier restrictive settings.
But the more important story isn’t the cut itself—it’s what happens next.
A Delicate Balance
The RBA’s August Statement described an economy in a fine balance. Private demand is recovering, public spending is still providing support, and the unemployment rate is just above 4%. But the Bank has downgraded its productivity growth assumptions, which could weigh on long-term growth and keep unit labour costs elevated.
Global Uncertainty Still Looms
Global conditions add complexity. The US faces higher tariffs, a slowing labour market, and uncertainty over trade and fiscal policy. China’s economy has been resilient thanks to broad-based policy support, but weakness in its property sector persists. While the risk of a damaging trade war has eased, global growth is expected to slow and the RBA sees the outlook for activity and inflation as “broadly balanced” but dependent on incoming data.
Markets Are Already Looking Ahead
Financial markets are pricing in further easing—possibly taking the cash rate towards 3.1% by early 2026, with two more cuts over the next year. But the RBA has made it clear it will take a “meeting-by-meeting” approach, ready to adjust if the balance of risks changes. The trajectory is not locked in.
What This Means for Borrowers
A rate cut is not an endpoint—it’s a cue to revisit your own interest rate expectations. The path ahead could still see further easing, a pause, or even a reversal if inflationary pressures re-emerge.
Questions worth asking:
- How would your position look if rates fell further?
- What if they stayed put or rose again?
- Is your loan structure resilient under multiple scenarios?
The Value of Having Advice at the Table
In uncertain times, having a debt advisor at your table can help you explore different rate paths, assess the potential impact on your borrowings, and prepare for a range of outcomes. Every RBA decision should be treated as the starting point for a fresh round of analysis—not the end of the conversation.
