UPDATE: The Reserve Bank of Australia (RBA) has just announced a significant interest rate cut, reducing the cash rate by 25 basis points to 3.6%, providing much-needed relief to borrowers amidst ongoing economic uncertainty. This decision comes after two previous cuts earlier this year and signals a cautious approach moving forward.
In a statement released earlier today, RBA Governor Michele Bullock emphasized that while the rate cut is a positive step, the board is approaching the end of its easing cycle. The board expressed concerns about the uncertain outlook for both demand and supply, making it clear that future decisions will be made “meeting-by-meeting” based on evolving economic data.
The cut means that borrowers with a $600,000 mortgage will see their monthly repayments drop by nearly $90. Since the start of the year, borrowers have saved approximately $272 in total monthly repayments due to previous cuts. The average variable mortgage rate is expected to decrease to around 5.5%.
Despite this relief, experts warn not to expect further significant cuts soon. Cherelle Murphy, chief economist at EY, noted, “The board will find it harder to justify moving into stimulatory territory as the cash rate approaches the ‘neutral’ rate.” The RBA’s cautious tone reflects ongoing global uncertainties, including the potential impacts of Donald Trump’s tariffs.
Treasurer Jim Chalmers hailed the decision as “very welcome relief for millions of Australians,” highlighting the collective effort to bring inflation down. However, analysts predict only one additional cut may occur by the end of 2025, contingent on economic recovery and stable unemployment rates.
Following the announcement, the local share market saw a modest increase while the Australian dollar weakened. Money markets are anticipating two more cuts by March, underscoring ongoing expectations for easing monetary policy.
As the RBA navigates these complex economic waters, the focus remains on data-driven decisions. All four major banks, along with challenger lender Macquarie, confirmed they would pass on the full rate cut to variable home loan borrowers, providing immediate financial relief.
Stay informed as this story develops, and be aware of how these changes may affect your financial decisions moving forward.
