February 2025 - RBA Cash Rate Update

It’s finally arrived! RBA cuts rates!

After more than a year of holding firm, the RBA has finally cut the official cash rate by 0.25%, bringing it down to 4.10%. It’s the first movement in rates since November 2023 and signals a shift in monetary policy as inflation eases and economic conditions stabilise.

Inflation is easing but services prices stay sticky

Inflation has now dropped into the RBA’s target range (2%-3%), with CPI sitting at 2.4% in December. That’s the good news. The not-so-good news? Underlying inflation is still elevated, with trimmed mean inflation at 3.2%. The main culprit being services inflation, which remains high at 4.3%, driven by rising rents, medical costs, and insurance premiums, a reminder that cost-of-living pressures aren’t going away just yet.

Employment market is solid

Despite some shifts in the economy, the jobs market is holding up well. Unemployment ticked up slightly to 4.0%, but employment growth is still outpacing population growth, a sign that demand for workers remains elevated. The participation rate hit a record high of 67.1%, meaning more Australians are either working or actively looking for work. With wages still growing and job vacancies steady, the RBA is likely to be cautious about future cuts, waiting to see how the labour market holds up.

Commercial property market impact

The first rate cut since 2020 is expected to ease financing costs, improve investor confidence, and support leasing activity. While commercial sale and lease transactions remained steady 2024, the rate hold period allowed buyers and sellers to adjust expectations, and early signs in 2025 suggest a more balanced market. Investor demand remains resilient, particularly in industrial and essential service assets, where yields have remained relatively stable despite higher borrowing costs. Sales volumes picked up in late 2024, and with a wave of new listings expected to hit the market, commercial real estate is positioned for a more active year ahead.

Read the full RBA statement here.