After two cuts, RBA holds rates: What can we expect to happen next?

The Reserve Bank of Australia (RBA) took a decisive step in May by cutting the official cash rate by 25 basis points to 3.85%, marking its second rate cut of 2025, and they held this position in their meeting held on 8 July. This move comes amid growing concerns about weakening economic growth and a cooling labour market. The RBA cited softer-than-expected inflation figures and subdued consumer spending as key reasons for easing monetary policy.
 
Major banks have already responded by passing the rate cut onto consumers, providing some relief for mortgage holders. Now, the focus has shifted to what lies ahead, and the consensus among economists is clear: more cuts are coming.

According to analysts, financial markets had priced in a 97% chance of another 25 basis point cut at the RBA's board meeting on July 8, which has not materialised. This expectation was driven by sluggish GDP growth, a soft housing market, and cautious consumer sentiment, which together signal a need for continued support from monetary policy.
 
Prior to this decision to hold, a group of economists from the Big Four banks (ANZ, NAB, Westpac, and CBA) were all aligned in their predictions. All anticipate at least one more cut later this year and potentially two, likely in August and or November, which would bring the total rate reductions for 2025 to between 50 and 75 basis points.
 
The property market could regain momentum, particularly among first-home buyers and investors who had previously been sidelined by higher rates. Additionally, we may see the market shift as the Labor government pushes forward initiatives aimed at helping more Australians purchase their first home with just a 5 per cent deposit, albeit that may not happen until early 2026.
 
While the path of monetary policy is never guaranteed, the RBA’s recent shift suggests a clear intent to support the economy through measured easing. The central bank has emphasised it will remain data-driven, keeping a close eye on inflation and labour market trends before making further moves.
 
For borrowers, the outlook is still encouraging. Interest rates are still expected to fall further in the coming months, potentially reaching 3.10% by the end of 2025.

Whether you're considering refinancing or entering the market for the first time, now may be an opportune time to reassess your financial position. If you’d like to speak more about this with our specialised lending team, contact us on the number below.

 

 

This information is general in nature and is provided by Partners Wealth Group. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.