Australia’s monetary policy landscape is entering a period of cautious stability, as stronger-than-expected economic data shifts the outlook for interest rates. With inflation gradually easing but growth and consumption proving unexpectedly resilient, the Reserve Bank is signalling a pause in further monetary easing.
This development carries significant implications for households, financial markets and the property sector. While borrowers may have hoped for more immediate relief, the decision reflects broader confidence in the underlying strength of the economy — and a recognition of the complex balancing act still facing policymakers.
Australia’s Economy Weathers Headwinds Better Than Expected
The Reserve Bank of Australia (RBA) left its official cash rate unchanged at 3.60%, maintaining the same level introduced after the 25 basis-point cut in August. That marked the third reduction in 2025, but expectations for further easing this year have since diminished. In her post-meeting statement, RBA Governor Michele Bullock stated that recent data had “not materially altered the outlook”, reinforcing the central bank’s cautious stance.
In the past month, incoming economic indicators have pointed to stronger-than-expected growth, with household consumption rebounding and business confidence improving. Per capita growth and productivity—both underwhelming in recent years—posted modest increases over the quarter. These gains are reducing pressure on the central bank to continue cutting rates in the short term.
According to the RBA, inflation is easing but remains above target. “Because the price level has gone up so much during the period of high inflation … households are still feeling the pain of those higher costs. This is why we’re so determined to keep inflation down.” Bullock said, explaining the Bank’s reluctance to move too quickly.
Housing Market Momentum Puts Rate Cuts on Hold
The housing sector is contributing to the rate pause. Property values are rising, and auction clearance rates are reaching their highest levels in four years. Demand remains particularly strong for homes priced below $2 million, where first-home buyers are active. Meanwhile, stock levels remain low, putting further upward pressure on prices.
According to BresicWhitney CEO Thomas McGlynn, the decision to hold rates “doesn’t come as a shock”, given recent upside surprises in inflation. “What we are seeing now is very much a market where both buyers and sellers can expect to pay and receive a fair price,” he noted, adding that buyer depth will be tested in the coming months as more listings are expected.
Further stimulus may come from the new Home Guarantee Scheme, launched this week, which will allow more first-time buyers to enter the market. While this aims to support home ownership, it may inadvertently fuel further price rises.
In this context, the RBA’s next move is likely to be delayed until at least February 2026, and even then, market observers now expect no more than a single cut. Any series of rate reductions appears increasingly unlikely under current economic conditions. For mortgage holders, the prospect of relief has been postponed—but for the economy, this resilience may be a reassuring sign.
