Commuters walk past the Reserve Bank of Australia (RBA) building in Sydney, Australia, on June 7, 2022. Brendon Thorne/Getty Images
The Reserve Bank of Australia (RBA) has lowered the cash rate by 25 basis points to 3.6 percent, the third cut this year.
The decision, made unanimously at the Aug. 12 meeting, follows a month-long pause in July when the rate was held at 3.85 percent to assess whether inflation was moving toward its 2–3 percent target range.
However, with underlying inflation easing and settling around the middle of its target range, and labour market conditions loosening as anticipated, the board judged another cut to be appropriate.
This brings total rate reductions this year to 75 basis points.
In its statement, the board said inflation has fallen sharply from its 2022 peak, with higher interest rates helping to bring demand and supply into better balance.
In the June quarter, trimmed mean inflation was 2.7 percent over the year, in line with earlier forecasts. Headline inflation, influenced partly by temporary cost-of-living relief, came in at 2.1 percent.
Global and Domestic Risks Remain
The board said there is now more clarity on U.S. tariffs and global policy responses, making extreme scenarios less likely.
However, trade developments are still expected to weigh on global activity, and uncertainty may cause businesses and households to delay spending.
The statement added that at-home, private demand has been slowly recovering, household incomes have improved, and some financial conditions have eased.
The labour market remains slightly tight, but conditions have softened. Unemployment averaged 4.2 percent in the June quarter, up from earlier lows, while underutilisation measures remain historically low.
Businesses continue to report labour shortages in some sectors.
The RBA said risks to the domestic outlook include slower-than-expected household consumption, which could dampen growth and job creation, or stronger-than-expected spending if real incomes and wealth rise faster than forecast.
Labour market outcomes could also exceed expectations, given signals from leading indicators.
