'No victory yet': The Reserve Bank cuts rates from a 13-year high — as it happened

The Australian Greens have reacted quickly to the news of the rate cut — saying banks can afford to double the rate cut as they have "plenty of room to move".

Senator Nick McKim said in a statement: "The Reserve Bank has cut rates by 25 basis points today, the big banks should now cut their rates by 50."

“Bank corporations are happy to increase their mortgage rates by more than the RBA puts them up when it suits them.

"They should do the same now rates are falling."

— Alex Britton

Sally Tindall, data insights director at the financial comparison site Canstar, told SBS News a rate cut is a good reminder to check in with your bank and ask if they will pass along the potential rate reduction.

"A cash rate cut is a fantastic time to look at your mortgage rate, ask your bank whether they're dropping that variable rate," she said.

While there's no guarantee the banks will pass on potential cash rate savings, Tindall predicted a flow-on effect to mortgages.

Banks may allow mortgage holders to switch to lower repayments, saving them money in the short term, but this might not be in their best interest.

Graham Cooke, head of consumer research at comparison site Finder, explained paying more now can reduce the total amount you owe in the long run.

"My main piece of advice is — don’t automatically jump on the lower repayments option," he told SBS News.

"If you can afford it, keep the higher repayments. Each time you do that after the rate drops, it will shave about a year off your mortgage, over 30 years."

Renters are in a "trickier situation" at the negotiation table, but Cooke said landlords might be willing to reduce the rent in a competitive market.

"Interest rates going down is not an argument landlords or agents will typically accept for a rent reduction, unfortunately," he said.

"Instead, you're better off keeping an eye on rental listings around you and finding examples of similar properties that have lowered their rent.

"Present these to your landlord as evidence that you are paying too much and that they may struggle to find a replacement tenant willing to pay the same."

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Homeowner or renter? Here's how to make the most of RBA rate cuts

— Madeleine Wedesweiler and Cameron Carr

The information in this article is general in nature and is not intended as financial advice. You should consult with a licenced professional to make the decisions that are right for you.

SBS News' chief political correspondent Anna Henderson writes:

Labor is hoping this is its reset moment, ahead of the election.

The government's ability to cut through with voters has been hobbled by the economic conditions, at the heart of that has been higher inflation and mortgage belt pain.

The latest polls suggest the Coalition is set to pick up seats in those suburbs feeling cost of living pressure the most.

This decision lays a path for the prime minister to head to the polls, and some on his backbench want that to happen sooner rather than later.

The RBA sets the official cash rate, which is the interest it charges to banks to leave money with it or with other banks overnight.

Banks then set interest rates for mortgage owners — either a fixed rate that they lock into, or a variable rate the bank changes in response to market conditions.

So if the RBA announces a decrease, would banks have to pass it on to customers?

The short answer is no, they don't have to, but they probably will.

The big banks should pass on RBA cash rate cuts to their existing variable mortgage customers, and do so within 10 to 14 days, as this is what happened for the majority of recent cash rate hikes, Canstar data insights director Sally Tindall said.

— Madeleine Wedesweiler

The Reserve Bank has given us the news we've all been waiting for.

As expected it has cut the official cash rate from 4.35 per cent — a 13-year high — to 4.1 per cent.

It's the first time since 2020 that the RBA has announced a decrease in the rate, following the tightening cycle it began in May 2022.

For an average owner-occupier with a $600,000 loan, that cut will translate to a $92 reduction to their minimum monthly repayments.

— Madeleine Wedesweiler

The Reserve Bank began its tightening cycle in May 2022, when it raised the official cash rate from 0.1 per cent.

Another 12 rate rises followed, the most recent in November 2023, which took the official cash rate to 4.35 per cent.

Australia's cash rate has remained steady at 4.35 per cent since the last increase in November 2023. Source: SBS

— Madeleine Wedesweiler

If the RBA makes the decision to cut rates and banks decide to pass the cuts on to borrowers, many Australians could see a slight reduction in their mortgage payments.

But others who rent or own their home outright would see the impact of interest rate cuts more in things like the labour market and cost of goods and services.

The 2021 Census, conducted by the Australian Bureau of Statistics, offers an insight into roughly how many people own homes or rent them.

At this time, 67 per cent of households (6.2 million) were homeowners. Around 32 per cent of these homes were owned outright (2.9 million households), and 35 per cent were owned with a mortgage (3.3 million households).

A further 31 per cent of homes were occupied by renters (2.9 million households).

According to the 2021 Census, 67 per cent of households were homeowners, with 32 per cent owning outright and 35 per cent with a mortgage, while 31 per cent rented. Source: SBS

— Madeleine Wedesweiler

Data by Canstar shows many households could save around $100 or more per month on their home loans after a single rate cut.

The amount is based on an owner-occupier paying principal and interest with 25 years remaining on their mortgage in February 2025 on the average variable rate for existing borrowers of 6.33 per cent as recorded by the RBA.

It also assumes the cash rate falls in line with the Commonwealth Bank of Australia (CBA)'s forecast for 2025 and assumes banks pass on RBA cuts to customers in full.

CBA's economic team expects four 0.25 percentage point cash rate cuts in 2025, with the first one expected in February and then one cut per quarter in the following three quarters.

Data by Canstar shows many households could save around $100 or more per month on their home loans after a single rate cut. Source: SBS

— Cameron Carr

Australia's four largest banks are predicting this year will bring multiple rate cuts, starting today.

ANZ is the most cautious, expecting two cuts, while CBA and Westpac forecast four.

NAB is predicting the most, with five cuts.

Credit: (AAP Image/Joel Carrett)

— Madeleine Wedesweiler

Australia's four largest banks have tipped the Reserve Bank of Australia (RBA) to cut the official cash rate by 0.25 per cent, taking it from 4.35 per cent to 4.1 per cent.

The RBA started increasing the rate that banks borrow money at in May 2022, and it has sat at 4.35 per cent since November 2023.

Sally Tindall, data insights director at financial comparison site Canstar, says we can expect banks to pass through those savings in full to their variable home loan rates.

Out of 32 Australian economists surveyed by AAP, 25 expected the RBA to drop its cash rate target by 0.25 per cent on Tuesday, bringing an end to 15 months with no change to monetary policy.

Economists have cited softer-than-expected inflation figures from December — including the trimmed mean, which measures underlying inflation, easing to an annual rate of 3.2 per cent.

But some indicators remain in support of a hold — RBA governor Michele Bullock has consistently cited tightness in the labour market behind the RBA's decision not to follow central bank peers in cutting rates earlier.

Australia's unemployment rate remains historically low at 4 per cent, below the bank's estimates of full employment, increasing fears inflation could start rising again if rates were cut too early.

— With additional reporting from AAP

The Reserve Bank of Australia (RBA) has made it its mission to lower inflation to its target range of between 2-3 per cent, using high interest rates to limit people's spending.

We were told last month that inflation was on its way to being within that range, depending on how you measure it.

Underlying inflation for the December quarter eased to 3.2 per cent, the lowest rate since late 2021, according to the Australian Bureau of Statistics (ABS). It was at 3.6 per cent in the previous quarter.

The RBA uses the trimmed mean — which removes the biggest price swings — to measure underlying inflation. It grew 0.5 per cent in the December quarter, the ABS said.

Source: SBS

This was one of the smallest increases since November 2020.

In January, Betashares chief economist David Bassenese told SBS News the figures were promising for a rate cut.

"There’s now a good chance trimmed mean "underlying" inflation could fall back to with the RBA’s 2-3 per cent inflation target band by June, rather than the RBA’s current expectation of December," he said.

— Madeleine Wedesweiler

Unions have warned a decision by the Reserve Bank of Australia (RBA) to keep rates on hold would be an "act of harm to working Australians".

Australian Council of Trade Union (ACTU) members gathered outside RBA's headquarters in Sydney, where final discussions are underway ahead of the announcement.

"We've seen that wages have been moderating, inflation falling, all of the indicators are there for them to cut interest rates," ACTU secretary Sally McManus told reporters.

McManus called for "at least a quarter of a per cent cut, but half a per cent would be much better".

"They need to join with the rest of Team Australia in doing the right thing."

Unions have called for the cash rate to be lowered since last year.

— Naveen Razik

Welcome to today's live blog where we'll bring you analysis and context around the Reserve Bank of Australia's (RBA) announcement on the official cash rate this afternoon.

At 2.30 pm AEDT the central bank is widely expected to announce the first cut to the official cash rate since 2020, following a period of lowered inflation rates at the end of last year.

The money market consensus is that the rate will be cut by 0.25 per cent — from 4.35 per cent to 4.1 per cent.

Prime Minister Anthony Albanese was asked this morning whether he thinks it's time for a rate cut, more than two years since the RBA's tightening cycle began.

He told ABC radio he has done what he can.

"We respect the independent decision that they will make," he said.

"They'll make a decision based on economics, not based upon any politics.

"What our job has been to do is to get inflation down — we've done that."

The federal Opposition has accused the government of trying to spin the situation.

"(For) the last two-and-a-half years, Australians have had to find an additional $50,000 on an average mortgage," Nationals senator Bridget McKenzie told Nine's Today show.

"That's money you're not going to get back no matter what happens today."

— Madeleine Wedesweiler