18/08/2025
The Reserve Bank of Australia has lowered the official cash rate by 25 basis points to 3.60 per cent - its first cut since July’s surprise pause and the third this year.
The unanimous decision takes the rate to its lowest level since April 2023 in a widely anticipated move aimed at supporting growth as inflation continues to ease.
All four major banks have confirmed they will pass on the reduction to customers by the end of August.
Knight Frank’s Chief Economist Ben Burston said the shift to more supportive policy settings could give commercial property investors a much-needed lift after subdued activity in recent months.
Global Capital Flows Could Rebound
The cut comes against a backdrop of global economic uncertainty, with trade tensions and tariff policies weighing on the growth outlook.
Mr Burston said this had dampened confidence.
“Uncertainty over the impact of tariffs on the global economy has weighed on sentiment in recent months, and while Australia is less exposed to the direct economic impacts than other countries, the resulting uncertainty over the outlook for global growth has led to slower decision-making,” he said.
In its statement, the RBA noted “a little more clarity on the scope and scale of US tariffs” but warned policy developments “are nevertheless still expected to have an adverse effect on global economic activity”.
Mr Burston said international conditions remain critical for Australian property.
“As clarity over trade policy starts to emerge, we expect a resumption of higher capital flows across the region, and the prospect of a further lowering of interest rates over the next 12 months will only strengthen the outlook for growth in Australian property markets,” he said.
Central Bank Signals More Easing Ahead
The RBA said inflation had “fallen substantially since the peak in 2022” and is expected to continue moderating towards the 2-3 per cent target range.
Trimmed mean inflation was 2.7 per cent in the June quarter, while headline inflation - partly affected by temporary cost-of-living relief measures - came in at 2.1 per cent.
Household incomes have improved and private demand is recovering; however, business conditions remain uneven, productivity growth is weak, and unit labour costs are elevated.
Labour market conditions have “eased further in recent months” but remain relatively tight, with unemployment at 4.3 per cent in June.
The board has left the door open for further rate cuts, and analysts at major banks expect at least one more before the end of 2025, potentially lowering the cash rate to 3.35 per cent.
The next rate decision will be delivered on 30 September, with two further meetings scheduled for November and December.
For commercial real estate stakeholders, the coming months will determine whether this easing cycle sparks a sustained rebound or delivers only a short-term boost in sentiment.
“Another interest rate cut will help to renew market momentum in the second half of the year after a subdued June quarter for investment activity,” Mr Burston said.
