RBA Cuts for the Third Time

What It Means for Investors and Households

On 12 August 2025, the Reserve Bank of Australia (RBA) cut its cash rate by another 0.25%, bringing it down to 3.6%. This marks the third rate cut in the current cycle, providing some relief to borrowers and signalling a continued focus on supporting the economy through a period of softer growth.

Why the RBA Made Its Move

The RBA decided to lower interest rates because inflation is now sitting comfortably within their target range, meaning price increases have slowed down as hoped. The Australian economy isn’t growing as strongly as expected, and there are early signs that jobs growth is losing steam and wage rises have cooled off. By reducing rates, the RBA is aiming to support the economy, give mortgage holders a bit of relief, and help maintain job growth while keeping inflation under control.

More Rate Cuts on the Horizon

AMP’s Dr Shane Oliver expects the RBA will keep cutting in a gradual fashion—potentially three more times to a cash rate of 2.85% by mid-2026. Without these further cuts, the RBA sees growth and inflation at risk of falling short, with unemployment expected to rise.

Importantly, most mortgage holders are opting to keep their loan repayments elevated, using rate relief to pay down debt faster rather than boost household spending. As a result, the flow-on effects to consumer activity and economic growth may play out more slowly than in previous cycles.

Why the Easing Cycle Is Likely to Continue

Dr Oliver outlines seven reasons for further cuts: below-trend growth, upside risks to unemployment, inflation under control, monetary policy that’s still restrictive, cautious consumer and business behaviour, Australia’s cash rate outpacing similar economies, and persistent global headwinds.

Investment and Property Implications

Lower rates typically give sharemarkets a tailwind over a six-to-twelve-month timeframe, though the journey is rarely smooth—structural issues and global factors could still drive volatility. In property, rate cuts boost affordability, which could support modest price gains through 2025.

Key Takeaway: Focus on Diversification

While a lower interest rate environment is designed to underpin economic growth and stability, it also highlights the importance of not relying too heavily on any single asset class. With equities and property potentially buoyed by rate cuts—but still exposed to volatility and broader risks—a diversified investment portfolio is more important than ever. Combining Australian and global shares, fixed income, cash, and direct property exposures can help smooth returns and protect wealth in an uncertain world.

At Hewison Private Wealth, our philosophy is centred on designing diversified, bespoke portfolios tailored to meet long-term goals—giving clients confidence through all market cycles, including periods of monetary easing.