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While the decision to hold rates was expected, it may come as a bit of a disappointment to borrowers who were hopeful for some lower interest rates.
The name of the game was caution, as has been a consistent theme throughout every 2025 monetary policy meeting.
According to the statement provided by the RBA following the call, there were key economic considerations that influenced the decision:
- Inflation: The rapid decline in inflation has slowed. Recent inflation data revealed it sits at 2.8 per cent, at the high end of the 2-3 per cent target range. Experts said it is higher than expected.
- Economic activity: The domestic economy is recovering, driven by a pick-up in private consumption and a strengthening housing market, partly due to recent interest rate cuts.
- Labour market: Conditions remain “a little tight” with a low unemployment rate, but employment growth has slowed. Growth in wages has eased, but weak productivity means labour costs are still rising quickly.
On top of this are some key uncertainties:
- Domestic: It is unclear if strong household consumption will persist, which could affect inflation and labour demand.
- International: Global economic uncertainty is high due to trade policies and geopolitical risks, which could negatively impact Australia’s growth and employment.
- Policy: The full effects of recent interest rate cuts are still unfolding.
Industry reacts
Just about everyone was unsurprised by the decision to hold. Prior to the meeting, each of the big four banks anticipated this outcome.
Following the meeting, MFAA CEO Anja Pannek said that while the hold will disappoint borrowers, the recent cuts have spurred some optimism and have resulted in improved refinancing conditions.
Aggregator Connective also commented on the decision, with executive director Mark Haron noting the hold “signals caution” from the central bank.
Haron doesn’t believe there will be another rate cut in 2025 and urged brokers to connect with clients.
“Brokers should help clients prepare for that possibility as it may spark a wave of buyer activity and refinancing decisions as the spring season gathers pace,” Haron said.
Borrowers are dialled in to rate decisions, with research from Money.com.au revealing 84 per cent of mortgage holders are concerned about how RBA decisions impact their finances.
Money.com.au’s finance expert, Sean Callery, said there is a tight line to tread for the RBA between taming inflation and easing pressure for borrowers.
“Homeowners may be disappointed they won’t be getting further repayment relief this time around, especially as we get closer to the festive season; traditionally an expensive time for households. There’s still hope for a rate cut in November, but that will hinge on the labour force and quarterly inflation data due in October,” he said.
“Unless we see a meaningful slowdown in inflation over the next quarter or an uptick in unemployment, the growing consensus is that the RBA will keep rates on hold for the rest of the year. Households hoping for a pre-Christmas rate cut may be disappointed.”
Still, a November cut is on the cards. The consensus is that the RBA will be eagerly awaiting the inflation figures for the September quarter before committing to a cut.
If the quarterly data is higher than expected, however, “all bets are off for a cut in November,” said Compare the Market’s economic director, David Koch.
“That’s why we’re urging Aussies to turn their rate cut frustration into motivation to find better deal. Don’t wait for the RBA to do you a favour – there are plenty of rates cheaper than the national average. If you haven’t refinanced for several years, you might be able to do better than the typical 0.25% Reserve Bank cut – a move that could put thousands back in your pocket over the life of your loan,” Koch added.
[Related: RBA delivers September cash rate call]
