The Reserve Bank of Australia (RBA) has decided to keep the cash rate unchanged at 3.60 per cent, following a meeting of its Monetary Policy Board.
According to the RBA, underlying inflation is still declining but at a slower pace. Since peaking in 2022, inflation has dropped significantly due to higher interest rates bringing demand and supply into closer balance. However, recent data suggest that inflation for the September quarter could be higher than previously expected.
Economic activity within Australia is showing signs of recovery, though the outlook remains uncertain. Data from the June quarter indicate private demand is rebounding faster than anticipated and is now driving growth instead of public demand. The RBA notes that “private consumption is picking up as real household incomes rise and measures of financial conditions ease.” The housing market is also strengthening, indicating that recent reductions in interest rates are starting to have an effect. Credit availability remains strong for both households and businesses.
Labour market conditions have been broadly steady but remain somewhat tight. Employment growth has slowed more than expected, yet the unemployment rate held steady at 4.2 per cent in August. Measures of labour underutilisation remain low while business surveys show little change in labour availability recently. Wages growth has eased from its peak; however, productivity growth continues to lag and unit labour costs are high.
The RBA highlights uncertainties affecting both domestic economic activity and inflation arising from local and international factors. Domestically, stronger-than-expected data on growth and inflation may reflect greater consumer confidence as incomes rise. If this trend continues, it could enable businesses to pass on higher costs or boost demand for labour; conversely, it may not persist if households become concerned about international developments.
Globally, uncertainty remains elevated due to ongoing trade policy changes—especially regarding US tariffs—and geopolitical risks which could impact global economic growth over time.
The RBA Board stated: “With signs that private demand is recovering, indications that inflation may be persistent in some areas and labour market conditions overall remaining stable, the Board decided that it was appropriate to maintain the cash rate at its current level at this meeting.”
They added: “Financial conditions have eased since the beginning of the year and this seems to be having some impact, but it will take some time to see the full effects of earlier cash rate reductions.” The Board emphasized caution given heightened uncertainty about future developments.
The decision was made unanimously by all members present at today’s meeting.
