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The Reserve Bank of Australia (RBA) has delivered a widely anticipated move, cutting the official cash rate by 25 basis points to 3.85% in its May 2025 meeting. This is the first shift in rates in several months and marks a notable change in tone as the central bank responds to weaker global and domestic conditions.
As a leading mortgage brokerage based in Sydney, hfinance.au is here to break down what this decision means for you—whether you’re a homeowner, property investor, or Australian expat.
Interest Rate Cut: A Response to Softer Growth
The RBA’s decision to reduce the cash rate from 4.10% to 3.85% signals a cautious but proactive stance amid:
Slowing domestic consumption
Global economic uncertainties
Inflation returning to the target range of 2–3%
This move is designed to stimulate growth and maintain economic stability in the face of headwinds, particularly around global trade.
Global Conditions Worsen: Trade Tensions Take a Toll
Rising geopolitical friction—especially the escalation of trade tariffs between the United States and China—has had ripple effects across international markets. These developments are weighing heavily on Australia’s economic outlook.
US Tariffs: Increased duties on imports are causing global trade disruptions.
China’s Response: Fiscal stimulus measures are being introduced to counteract slowing demand.
Impact on Australia: Weaker global trade is expected to moderate Australia’s GDP growth and limit export momentum.
Domestic Snapshot: A Mixed Economic Picture
GDP & Consumption
Australia’s GDP growth is now forecast to be more gradual due to softer consumer spending and global demand.
Labour Market
Unemployment remains steady at 4.1%, but is projected to rise slightly through 2025.
Wage growth has slowed, reflecting more subdued labour conditions.
Inflation
Trimmed mean inflation sits at 2.9%
Headline inflation is at 2.4% (year to March)
These figures fall within the RBA’s target band, providing room for interest rate adjustments.
Housing Market
Despite the rate cut, the housing market remains stable:
Modest price growth
No signs of overheating or rapid correction
Global Trade Risks Still Loom
The RBA has clearly flagged global trade policy uncertainty as a key risk moving forward. Rising tariffs and volatile trade relations are expected to:
Disrupt exports
Raise the cost of imported goods
Potentially impact household budgets and borrowing costs
What This Means for You
For Homeowners:
Lower repayments: A 25 basis point cut can offer savings on variable rate loans.
Refinancing opportunities: Now may be a good time to review your home loan or consider locking in a fixed rate for stability.
For Australian Expats:
Exchange rates: Stay alert to currency movements that can affect your repayments.
Enhanced borrowing power: Lower rates improve your position if you’re looking to invest back home.
What’s Next? RBA Meeting in July
The RBA will meet again on July 8, 2025. All eyes will be on the Board’s next move as markets continue to digest the economic signals.
Need Advice? hfinance Can Help
At hfinance, we’re committed to helping you make informed mortgage decisions. Whether you’re buying your first home, refinancing, or investing from abroad, now is a great time to review your options.
📩 Reach out today for a personalised consultation.
