The Reserve Bank of Australia (RBA) has decided to leave the cash rate steady at 3.6 per cent in its September 2025 meeting. It follows a unanimous decision from the RBA to reduce the rates by 0.5 per cent in August.
The RBA board judged that caution is appropriate, given uncertainties in the inflation outlook and the need to see how previous cuts feed through. Additionally, the labour market conditions remain relatively tight, and wage pressures are a risk.
“With signs that private demand is recovering, indications that inflation may be persistent in some areas and labour market conditions overall remaining stable, the board decided that it was appropriate to maintain the cash rate at its current level at this meeting,” its statement read.
Back in July 2025, the Reserve Bank of Australia (RBA) left the official cash rate unchanged at 3.85 per cent in its July 2025 meeting, defying widespread expectations of a 25 basis point cut. Its interest rate cuts of 25 points made headlines across the Australian media landscape on 20 May, providing some breathing space for Australians.
“Inflation remains within the target range, but recent data indicate there could be a bit more upward pressure than we thought,” said RBA governor Michele Bullock
The RBA has signalled that further easing is possible later in the year if inflation continues to track lower.
Have the major banks passed the RBA rate cuts?
In August, CBA (Commonwealth Bank), ANZ, NAB, and Westpac confirmed they will pass on the full 25 basis point reduction to standard variable home loan rates. Implementation dates differ:
- CBA and ANZ: from August 22
- NAB: from August 25
- Westpac: from August 26
- Macquarie Bank was even quicker, implementing the reduction by August 15, making it one of the fastest movers among major lenders.
The lead-up:
The cautious tone in July was in contrast to May 2025, when the RBA cut interest rates by 25 basis points to 3.85% — the first reduction in over a year and its lowest level in two years.
This 25 basis point reduction followed a previous cut in February and a rate hold in April, which signalled a shift to supporting economic stability amid easing inflation and global uncertainties (aka Trump Tariffs and disruption to global economies due to the conflicts in Gaza and Ukraine).
The cut came as inflation eased and global economic uncertainty grew. With inflation now sitting comfortably within the RBA’s 2–3% target range, this rate drop was designed to gently support the economy without sparking another cost-of-living blowout.
More than 100 lenders responded by lowering variable home loan rates, offering some much-needed relief to borrowers.
Markets had largely anticipated the May cut, with a Reuters poll showing near-unanimous expectation of the move. Still, the rate cut signalled a shift in the RBA’s stance — from a period of extended monetary tightening to one of cautious easing — as it tried to balance economic growth with inflation control.
Why were the rates cut in May 2025?
There are multiple reasons. First and foremost, to get inflation under control. It dropped to 2.4 per cent, down from the frightening 7.8 per cent peak in late 2022.
However, the global outlook is shaky. As aforementioned, tensions overseas and new U.S. tariffs have made central banks cautious.
Finally, our economy needs support: While employment remains solid, the RBA is giving things a nudge in the right direction.
“[The] decision will be met with a sigh of relief from households and businesses who have been counting on another rate cut to boost their cashflow,” said the accounting body CPA Australia’s Business Investment Lead, Gavan Ord.
“After multiple rate rises, persistent inflation and cost-of-living pressures, consumer and business confidence remain subdued. This cut should lift sentiment slightly and put a bit more money back into people’s pockets.
However, the July meeting showed the RBA’s more cautious stance, opting to hold rates steady as they wait for greater evidence that inflation is sustainably under control.
What do the current RBA rates mean for you?
For mortgage holders:
The May cut offered borrowers some breathing room, and the August cut should give even more leeway. Canstar estimates that, with banks passing the cut on in full, the average borrower with 25 years remaining could now save:
- $148 on a $1 million loan
- $74 per month on a $500,000 loan
- $89 on a $600,000 loan
- $111 on a $750,000 loan
“While one cut is unlikely to be a silver bullet for many households, it’s a small weight off the shoulders of millions of borrowers across the country,” said Canstar’s Sally Tindall.
Canstar outlined that the average home buyer with 25 years remaining on their loan could see their repayments drop by $74 for a $500,000 loan, $89 for a $600,000 mortgage, $111 for a $750,000 mortgage, and $148 for a $1 million loan. You can read their number crunching here.
All four major banks (NAB, ANZ, Commonwealth Bank, and Westpac) have yet to confirm if they will pass the cuts.
If you’re renting:
There’s still no direct benefit for renters. Unless landlords pass on any mortgage savings — which is rare — rent relief remains unlikely in the short term.
That said, continued rate cuts could gradually ease pressure in the housing market, potentially slowing future rent increases.
If you’re a saver or retiree:
Lower interest rates are a double-edged sword. For those relying on interest income, the August cut is another blow, chipping away at the improved returns seen after recent years of rate hikes. While savings account and term deposit rates remain higher than during the record-low era, they are now starting to head south again.
Retirees may find their savings earning even less, which could strain household budgets. This might impact those living on retirement savings.
If you’re shopping or borrowing:
Interest rates on credit cards and personal loans can move with the cash rate, though changes often lag and aren’t always passed on in full. The August cut may slightly reduce borrowing costs for some, adding to the modest relief from earlier in the year.
With the RBA signalling an ongoing easing bias, further cuts later in 2025 could deliver more favourable lending conditions, supporting household spending and economic activity.
What’s next?
The RBA has signalled it’s in wait-and-see mode, with the September quarter inflation data (out in late October) now critical. If prices continue easing towards the 2–3 per cent target band, the door opens for another cut as soon as November. But if inflation proves sticky, the RBA is more likely to sit tight until early 2026.
Global factors — from US tariffs, knock-on effects from land wars in Europe and the Middle East, to China’s growth outlook — will also weigh heavily on the timing of any move.
The move marks a cautious pivot toward monetary easing, with markets now watching for signs of further cuts later in the year.
