Australia’s central bank implemented its third interest rate reduction this year, lowering the benchmark cash rate by 25 basis points to 3.6%, according to AP News.
This decision, announced unanimously by the Reserve Bank of Australia’s (RBA) board, follows earlier cuts in February and May, bringing the rate to its lowest level since March 2023. The move was widely anticipated by economists as inflation continues its downward trajectory and economic growth shows signs of stagnation.
Governor Michele Bullock acknowledged persistent global uncertainties in her statement, noting:
“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,” she said.
The RBA’s decision aligns with its mandate to steer inflation toward the target band of between 2% and 3%, with annual headline inflation declining to 2.1% in May from 2.4% in April.
The bank’s preferred measure of underlying inflation, the trimmed mean, fell to 2.7% in the June quarter, down from 2.9% in March. This marks a significant deceleration from the peak of 7.8% recorded in late 2022. The July board meeting had ended with a 6–3 vote to delay cuts pending June quarter inflation data, which ultimately confirmed the disinflationary trend.
Economic growth slowed markedly, with GDP expanding just 0.2% in the March quarter and 1.3% year-on-year. Unemployment rose to 4.3% in June, up from 4.1% earlier in the year.
Treasurer Jim Chalmers welcomed the rate cut, stating it provided “very welcome relief for millions of Australians” and would “put more money in the pockets of people who are under pressure.” The RBA’s gradual easing aims to balance inflation control against recession risks, though labour market softening has added urgency to stimulus efforts.
Westpac chief economist Luci Ellis noted the cuts align with evolving economic conditions, suggesting further reductions may follow in November and early 2026.
