The Reserve Bank of Australia's Monetary Policy Board has decided to reduce the cash rate target by 25 basis points, setting it at 3.60 per cent. This decision was made at the Board’s meeting on August 12, 2025.

According to the Board, inflation in Australia continues to moderate. Since peaking in 2022, inflation has fallen substantially as higher interest rates have helped balance aggregate demand and potential supply. In the June quarter, trimmed mean inflation over the year declined to 2.7 per cent, which aligned with expectations from May. Headline inflation stood at 2.1 per cent for the same period, also matching forecasts. Updated staff projections suggest that underlying inflation will continue easing toward the midpoint of the Reserve Bank’s 2–3 per cent target range, assuming a gradual path of monetary policy easing.

Uncertainty remains high in both domestic and global economic outlooks. The statement notes there is now more clarity regarding US tariffs and other countries’ policy responses, making extreme outcomes less likely. However, trade policy developments are still expected to negatively impact global economic activity, and ongoing uncertainty may cause households and firms to delay spending decisions.

Domestically, private demand appears to be recovering gradually, real household incomes have improved, and some financial conditions have eased. Labour market indicators show conditions remain somewhat tight but have softened recently; the unemployment rate rose to 4.3 per cent in June and averaged 4.2 per cent for the quarter—figures consistent with previous forecasts.

Business surveys indicate labour availability continues to constrain some employers despite a slight easing in labour market tightness. Wages growth has moderated from its peak levels; however, productivity growth remains weak and unit labour costs are still elevated.

The Board highlighted several uncertainties affecting future domestic activity and inflation due to both international and local factors. The latest forecasts anticipate continued recovery in household consumption as real incomes rise, though some businesses report weak demand makes it difficult to pass on cost increases to consumers. There is a risk that consumption growth could be slower than anticipated or that stronger-than-expected real income gains could lead households to spend more and save less.

The effects of recent monetary policy changes may take time to fully materialize, with questions remaining about how firms' pricing strategies and wage-setting behavior will adjust amid ongoing productivity challenges.

"The Board judged that a further easing of monetary policy was appropriate," according to today’s statement. "This takes the decline in the cash rate since the beginning of the year to 75 basis points." The Board emphasized its cautious approach given ongoing uncertainty about aggregate demand and supply conditions: "It noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation in Australia."

The statement concludes: "The Board will be attentive to the data and the evolving assessment of risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market. The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome."

Today's decision was reached unanimously by all members of the Monetary Policy Board.