Aussie home borrowers have been given some more relief with the Reserve Bank cutting interest rates again for the third time this year.
The RBA has cut the cash rate by another 25 basis points, taking it back to 3.6 per cent for the first time since May 2023.
The latest cut means a borrower with an average, $660,000 mortgage will save $106 on their monthly home loan repayments.
This followed relief in February and May, and avoided a repeat of July when the Reserve Bank left rates on hold – surprising financial markets.
A rate cut was more likely on Tuesday afternoon after underlying inflation for the June quarter fell to 2.7 per cent, putting it closer to the midpoint of the RBA’s two to three per cent target.
‘Updated staff forecasts for the August meeting suggest that underlying inflation will continue to moderate to around the midpoint of the 2–3 per cent range, with the cash rate assumed to follow a gradual easing path,’ the RBA monetary policy board said on Tuesday.
‘With underlying inflation continuing to decline back towards the midpoint of the 2–3 per cent range and labour market conditions easing slightly, as expected, the board judged that a further easing of monetary policy was appropriate.’
The headline inflation rate of 2.1 was also at a four-year low, helped by $75 quarterly electricity rebates that have been extended until the end of 2025.
‘Headline inflation, which has partly been affected by temporary cost of living relief measures,’ the RBA said.
The latest rate cut was in line with futures market expectations, which are also expecting two more rate cuts in 2025 that would take the cash rate back to 3.1 per cent for the first time since February 2023.
The 75 basis points of rate cuts since the start of 2025 mark the most generous monetary policy easing since the start of the Covid pandemic in March 2020.
New RBA forecasts released on Tuesday had underlying inflation without volatile price movements staying at 2.6 per cent into 2026.
But the Reserve Bank had headline inflation climbing back to three per cent by December, up from 2.1 per cent now, following the expiry of the $75 quarterly electricity rebates.
Treasurer Jim Chalmers said the third rate cut in six months was welcome news for Aussie borrowers.
‘This is very welcome relief for millions of ns,’ he said.
‘This interest rate cut will make a meaningful difference to millions of mortgage holders around the country. It will put more money in the pockets of people under pressure.’
The Reserve Bank hinted it could embark on deeper cuts should Donald Trump’s tariffs worsen global trade.
‘It noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation in ,’ it said.
‘Uncertainty in the world economy remains elevated. There is a little more clarity on the scope and scale of US tariffs and policy responses in other countries, suggesting that more extreme outcomes are likely to be avoided.
‘Trade policy developments are nevertheless still expected to have an adverse effect on global economic activity, and there remains a risk that households and firms delay expenditure pending still greater clarity on the outlook.’
The 75 basis points of cuts in 2025 have only partially undone the 425 basis points of hikes in 2022 and 2023, with 13 RBA moves.
‘s unemployment rate of 4.3 per cent, while low, is still at a near four-year high.
‘Various indicators suggest that labour market conditions remain a little tight, although have eased further in recent months,’ the RBA said.
‘Measures of labour underutilisation nevertheless remain at low rates and business surveys and liaison suggest that availability of labour is still a constraint for a range of employers.’
While inflation is moderating, the Reserve Bank is worried that weak productivity could still push up wage costs and revive inflationary pressures.
‘Looking through quarterly volatility, wages growth has eased from its peak but productivity growth has not picked up and growth in unit labour costs remains high,’ the RBA said.
‘There are uncertainties about the outlook for domestic economic activity and inflation stemming from both domestic and international developments.’
The latest cut will see monthly repayments on an average, $660,000 fall by $106 to $3,975.