RBA cuts rates, issues warning; ASX hits high; Star strikes deal

Published: August 12, 2025

RBA cuts rates, issues warning; ASX hits high; Star strikes deal

News in brief

The interest rate cut helped push the local sharemarket to an all time high yesterday, with the S&P/ASX 200 setting an intraday record, and then a new closing high of 8880.8 points. The banks were the best performers.

Star Entertainment has struck a $53 million deal to sell its 50% stake in Brisbane’s Queen’s Wharf casino. The struggling casino operator reaching an agreement with its Hong Kong-based business partners after missing a key deadline two weeks ago and following months of tense negotiations.

Australian business confidence rose to a three-year high in July. National Australia Bank's monthly survey shows business confidence buoyed by strength in services and construction, delivering the highest rating since August 2022.

The Trump administration has extended the current tariff pause on Chinese imports for another 90 days, delaying a potential escalation between the world’s two largest economies.

Airlines are cashing in on soaring demand for business, first and premium economy seats. Flight Centre saw an 18pc lift in international premium class bookings last year versus a 10pc rise in economy bookings

Emirates is even ripping out 10,000 economy seats in order to boost its premium offering.

Fear-o-meter

In his latest note, AMP Chief Economist Shane Oliver gave seven reasons to expect more RBA rate cuts:

1. The latest rate cut means that just three of the 13 rate hikes between May 2022 and November 2023 which totalled 4.25% have been reversed. For mortgage payments it will reverse another $1260 of the $16,800 increase in annual payments on a $660,000 mortgage since May 2022. Or a total saving of $3780, which only reverses 23% of the increase in payments between May 2022 and November 2023.

2. Partly reflecting this, the outlook for consumer spending remains subdued. Evidence from the banks, national accounts and various consumer surveys suggest that mortgage holders are saving the bulk of their interest rate savings by maintaining their monthly mortgage payments for now.

3. Weak consumer demand will likely in turn constrain business investment.

4. While unemployment at 4.3% remains historically low it appears to be resuming its gradual rising trend, forward looking jobs indicators are softening and so the risks are on the upside. What’s more there remains no sign of a wages breakout with wages growth down from its 2023 high.

5. The cash rate is still above most of the RBA’s estimates of the neutral rate which averaged around 2.8% as at May when the RBA last published it.

6. Underlying inflation in Australia is in line with or below that in the Eurozone and Canada both of which have rates well below the RBA’s cash rate.

7. While the tariff threat to global and hence Australian growth receded with Trump pausing the tariffs in April, the average tariff on US imports following latest US announcements is still 6 or 7 times greater than last year’s level. So, Trump’s trade war is still going to be a drag on global and hence Australian economic growth.

Fear & Greed Q+A today

How many more interest rate cuts will we see?

"We have one more rate cut in our base case scenario here at Commonwealth Bank. We do expect the Reserve Bank to cut the cash rate again in November. The clear risk lies with an additional rate cut in 2026. Although when we look at our forecast versus the Reserve Bank's forecast, we are a little bit more optimistic on the economic recovery here in Australia. And I think we can see a scenario where the Australian economy improves a little bit faster."

It’s Wednesday the 13th of August. The Reserve Bank board cut the official cash rate by 25 basis points to 3.6pc yesterday, a move that was quickly passed on by the big four banks. The cut was widely expected, as inflation continues to soften, but RBA governor Michele Bullock emphasised the huge productivity challenge facing the economy - just in time for next week's productivity roundtable in Canberra.

Greed-o-meter

Bank	Effective date	Lowest rate
CBA	22 Aug 2025	5.34%
Westpac	26 Aug 2025	5.34%
ANZ	22 Aug 2025	5.64%
NAB	25 Aug 2025	5.69%

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The big four banks were quick to announce they'd pass on the interest rate cut. Here's the expected lowest rates from each of them.

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Source: Mozo

Business By Numbers

The top 3 numbers to know for the week, brought to you by Xero

3.6pc: The official cash rate, after the Reserve Bank lowered it by 25 basis points.

8880.8 points: The S&P/ASX 200 hit a new closing high yesterday, buoyed by the interest rate decision.

20%: The jump in lithium miner Pilbara Mineral's share price on Monday after a mine in China was forced to shut for at least three months.