Australian interest rate changes since 1990

RBA Cuts Cash Rate to 3.60% — 3rd Cut in 2025

Date: 12 Aug 2025
Move: -25 bps (from 3.85% to 3.60%)
Pattern:

• May 2025: -25 bps (3.85% from 4.10%)

• Feb 2025: -25 bps (4.10% from 4.35%)

• This marks three consecutive cuts in 2025, totalling -75 bps, after an aggressive tightening cycle from 2022 to late 2023.

Historical Perspective

• Peak Cycle: 4.35% in Nov 2023, the highest since before the 2008 crisis.

• Speed of Easing: The RBA hasn’t cut rates this consistently since the pandemic shock in 2020, suggesting a pivot toward supporting growth over controlling inflation.

• Long-term Trend: Post-2011, Australia has experienced a secular decline in rates — the current easing aligns with global central bank shifts as growth headwinds strengthen.

Likely Drivers of the Cut

1. Slowing Growth — Weak retail sales, declining housing approvals, and softer labor market prints in H1 2025.

2. Inflation Moderation — CPI has likely fallen closer to the upper bound of the RBA’s 2–3% target, allowing policy flexibility.

3. Global Monetary Policy Shift — The Fed, ECB, and BoE are all in or near easing phases; the RBA may be preempting external slowdown spillovers.

4. Currency Management — A softer AUD could support exports, but risks imported inflation if the USD strengthens too much.

Market Impact — Immediate

• AUD: Typically weakens on rate cuts — watch AUD/USD reaction around support at 0.65–0.6550.

• Equities: ASX200 may get a boost, especially rate-sensitive sectors (REITs, consumer discretionary).

• Bonds: Yields on short-dated government securities likely to drop further; curve may steepen if long-term growth optimism holds.

Risks to Monitor Today

• FX Volatility: Global traders will position ahead of US CPI data (later this week), which could amplify AUD swings.

• Forward Guidance Clues: Any hints in RBA commentary about further cuts could drive bond yields lower.

• Global Spillover: China’s latest trade figures and ongoing property sector concerns could weigh on Australian export sentiment.

Day-Ahead Watchlist (from Economic Calendar & Global Headlines)

1. Australia — RBA Governor’s post-meeting press conference for tone on policy path.

2. US — Political noise from Trump’s DC federalization move may keep risk sentiment edgy.

3. India — Opposition protests over electoral integrity could raise South Asia political risk.

4. Commodities — Iron ore prices are sensitive to China’s demand data today; important for AUD traders.