Monetary Policy Decision

Media Conference – 12 AUGUST 2025

Decision
The cash rate target was lowered by 25 basis points to 3.60 per cent. The policy decision was unanimous.

Inflation
Inflation has declined markedly from its peak in 2022, with higher interest rates helping to bring aggregate demand and supply into better balance. In the June quarter, trimmed mean (underlying) inflation was 2.7 per cent, consistent with earlier forecasts, while headline inflation was 2.1 per cent. Staff forecasts presented at the August meeting indicate that underlying inflation is likely to moderate further, reaching around the midpoint of the 2–3 per cent target range, under the assumption of a gradual easing in the cash rate.

Economic and Labour Market Conditions
Global economic uncertainty remains elevated, though recent clarity on US tariffs and other countries’ policy responses reduces the risk of extreme outcomes. Nonetheless, trade policy measures are still expected to exert a dampening effect on global activity, with households and businesses potentially delaying expenditure until the outlook becomes clearer. Labour market conditions remain tight, and labour availability continues to constrain a range of employers.

Monetary Policy Stance
With underlying inflation easing toward the midpoint of the 2–3 per cent range and labour market conditions softening slightly, the Board deemed a further cash rate reduction appropriate, bringing the year-to-date decline to 75 basis points. The Board nevertheless remains cautious amid elevated uncertainty.