The Reserve Bank of Australia (RBA) has announced a 25 basis point cut to the official cash rate, bringing it down to 3.85%, offering welcome relief for mortgage holders.
This marks the second rate cut in the current cycle, following a reduction in February and a pause in April. The decision came after the RBA’s May board meeting—its second under the new dual-board structure.
The move, widely expected by economists and markets, means homeowners with a $600,000 mortgage and 25 years remaining could save around $91 per month, according to Canstar.
AMP Chief Economist Shane Oliver supported the cut, citing tight policy settings and slowing economic growth. He added that the RBA would likely revise its growth forecast downward due to weak consumer spending.
Independent economist Saul Eslake also expected the May rate cut but cautioned that future cuts might be limited. “One rate cut was almost certain, two is likely, but beyond that is uncertain,” he noted.
Eslake warned that while some believe U.S. economic pressures, including tariffs, could lead to further cuts, there is no clear evidence yet to support that outlook.
The RBA’s decision follows favorable inflation data, though stronger-than-expected employment figures—such as 89,000 new jobs in April—had dampened market confidence in further rate cuts.
Before the announcement, bond markets had priced in an 87% chance of a cut to 3.85%, down from 95% earlier in the month due to the robust job data.
