The Reserve Bank of Australia has held the cash rate steady at its most recent meeting, but the question on every economist's lips is: how long can this last?
With inflation proving more resilient than forecast, the RBA faces a delicate balancing act between cooling price pressures and avoiding a sharp slowdown in economic activity.
Key Indicators to Watch
Three factors will dominate the RBA's decision-making for the remainder of 2025: the labour market, housing prices, and global commodity flows.
Australia's unemployment rate has remained historically low, which ordinarily gives the central bank room to keep rates elevated. However, leading indicators suggest the labour market may be softening more quickly than headline figures imply.
What This Means for Mortgage Holders
For the approximately 3.2 million Australian households with a variable-rate mortgage, even a 25 basis point cut would provide meaningful relief. On a $600,000 loan, that translates to roughly $90 per month in savings.
Our base case is for one cut in late 2025, with a second cut likely in early 2026 if inflation continues its gradual descent toward the RBA's 2–3 per cent target band.
