RBA Cuts Cash Rate to 3.85%: What It Means for You
- laibatariq2300
- May 20
- 2 min read
Published by GBS Accountants & Advisors—20th May 2025
The Reserve Bank of Australia (RBA) has reduced the official cash rate target by 25 basis points to 3.85%, following its latest monetary policy meeting. The move reflects a response to falling inflation and slower-than-expected economic growth — and offers new opportunities and challenges for businesses and individuals alike.
Why Did the RBA Cut Rates?
Inflation has been steadily declining, with headline inflation sitting below the RBA’s 2.5% mid-point target for two consecutive quarters. Trimmed mean inflation has also come down, and wage growth has remained within expected limits.
Dr Shane Oliver, AMP’s chief economist, explains:
“GDP growth looks weaker than expected, with flat consumer spending in the March quarter and growing global uncertainty. The RBA is now more confident that inflation is sustainably easing.”
RSM economist Devika Shivadekar added that this consistent inflation data gave the RBA “comfort” in delivering a further cut.
A Welcome Change for Homeowners and Borrowers
Lower interest rates offer direct relief for mortgage holders and may open doors for new buyers.
Aylin Unsal, General Manager at Accounting Home Loans, notes:
“For someone with a $600,000 mortgage over 25 years, a 0.25% rate cut could reduce monthly repayments by around $91. This also boosts borrowing capacity — a helpful lift for prospective buyers.”
What It Means for Your Business
Businesses struggling with tight cash flow or hesitant consumer spending may benefit from improved borrowing conditions and reduced loan costs. However, caution remains necessary.
Sean Langcake of BIS Oxford Economics warns:
“Despite easing inflation, the economy still faces uncertainty shocks. Continued strategic planning is essential.”
At GBS Accountants & Advisors, we recommend that both individuals and business clients review their lending structures, cash flow forecasts, and growth plans in light of the new rate environment.
Need Guidance?
Whether you’re a homeowner, investor, or business owner, now is a good time to re-evaluate your financial strategy. A small change in the cash rate can have significant long-term effects.
Let’s Talk!Need help understanding how the rate cut affects your finances or business strategy?Speak to GBS Accountants & Advisors today — your trusted partners in smarter financial decisions.
If you're looking to buy a property or refinance at a better interest rate with a better product, don't hesitate to reach out to us at 1300 766 427 or 03-9305 3665. We're here to help!
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