“Australia Slashes Interest Rates to 3.6%, Cuts 2025 GDP Forecast Amid Slowing Growth”

RBA Lowers Cash Rate to 3.6%

The Reserve Bank of Australia (RBA) has reduced its benchmark interest rate by 25 basis points, bringing it down to 3.6% — the lowest level since April 2023. This move was widely expected by economists surveyed by Reuters.

The RBA explained that monetary policy remains restrictive, with higher borrowing costs putting pressure on households. However, it did not completely rule out the possibility of future rate hikes if inflation starts to climb again.

Economic Growth Forecast Downgraded

The central bank revised its GDP growth forecast for 2025 to 1.7%, down from the previous 2.1% estimate.
The weaker outlook is mainly due to lower-than-expected public spending in early 2025, which is unlikely to be fully offset later in the year.

Inflation Near Target Range

Australia’s inflation rate fell to 2.1% in the second quarter of 2025 — the lowest since March 2021 and close to the RBA’s target range of 2%–3%. The bank credited previous rate increases for slowing aggregate demand and aligning it more closely with supply.

Market Reaction

Following the announcement:

• The S&P/ASX 200 index rose 0.3%.

• The Australian dollar weakened slightly by 0.15%, trading at US$0.6501.

Impact of Global Trade Policies

The rate cut comes amid a shifting global trade environment. Recently, the U.S. imposed a 10% tariff on Australian goods under President Donald Trump’s policy.
Australia’s Trade Minister described the outcome as a “vindication” of the government’s trade negotiations.

The RBA noted that the threat of a major trade war has lessened and that recent trade policy changes have had minimal impact on Australia’s economy so far. However, it warned that global trade disruptions remain a risk.

Sluggish First-Quarter Growth

Australia’s economy expanded by 1.3% year-on-year in the first quarter of 2025, below the 1.5% growth forecast by Reuters.
On a quarterly basis, growth was just 0.2%, missing the expected 0.4%.

Katherine Keenan, head of national accounts at the Australian Bureau of Statistics (ABS), attributed the slowdown to falling public spending, weaker consumer demand, and lower exports.

Future Rate Expectations

• Analysts at the Commonwealth Bank of Australia predict another rate cut in November 2025 and possibly one more in early 2026.

• Capital Economics forecasts rates could fall to 2.85% by mid-2026 as inflation continues to ease.