By The Good Builder | July 2025
The rate cut we almost had
If you were getting ready to celebrate a July rate cut, or just budgeted for an extra-long brunch, the RBA had other ideas.
In a surprise to borrowers and bank economists alike less than 24-hours ago, the Reserve Bank decided to hold the cash rate steady this month. That’s despite inflation data falling neatly within the target band.
The reaction? Confusion. Frustration. And a general sense of “well, what was the point of all those hopeful headlines last week?”
But before you go cancelling your plans for that spring reno or refinancing deal — August is still very much in play.
What got the market excited in the first place?
Late June brought good news. The ABS monthly CPI indicator for May showed:
- Headline inflation: 2.1%
- Trimmed mean (the RBA’s preferred metric): 2.4%
Both figures landed inside the RBA’s target range of 2–3%.
In most households, that would be a green light. But at RBA HQ? Not so fast.
Governor Michele Bullock reminded everyone that the monthly CPI data is, in their view, not as reliable as the quarterly numbers.
“The monthly CPI is not a full CPI,” Bullock said. “Each month has different components… we take a little bit of a signal from it, but we don’t really depend on it.”
In short: cool numbers, but we’ll wait for the proper stuff.
What’s the real date to watch?
July 30.
That’s when the ABS drops the June quarter inflation report — the data that the RBA actually uses to make decisions.
The magic number? 2.6% trimmed mean inflation.
That figure was forecast in the RBA’s May statement. If the upcoming data hits it (or goes lower), an August 12 rate cut is nearly guaranteed.
“If it comes in as we think it will,” Bullock said, “then that validates our easing path.”
But how big will the cut be?
If inflation’s tamed and global markets stay calm, expect a standard 0.25% cut.
But there’s a wildcard in the room — Donald Trump.
By August 1, we’ll know whether the former US president has reimposed major tariffs or cut last-minute deals. If markets panic, the RBA could go bigger — 0.5% or even more — to get ahead of the shock.
Bullock denies the RBA is “keeping its powder dry,” but she did note that there’s more room to move now than there was pre-COVID, when rates were already scraping the floor at 0.75%.
Why the RBA said no (for now)
Here’s what we do know:
- Three out of nine board members voted to cut.
- Six voted to hold.
- Bullock didn’t say which way she went.
- Westpac’s chief economist, Luci Ellis (formerly of the RBA), reckons staff probably recommended holding, and most board members went along.
There’s a good old-fashioned case of committee caution here — no one wants to cut too early and then have to reverse it if inflation bounces.
“We don’t want to end up having to fight inflation again,” Bullock said. “We want to make sure we’ve nailed it.”
What does it mean for builders and borrowers?
If you’re in construction, development, or just have a mortgage — keep your powder dry.
- Builders: August could be your turning point for project viability, especially in regions hit hard by finance costs.
- Brokers and banks: Your phones might start ringing again… in a few weeks.
- Buyers: Sit tight. A lower rate might open up borrowing power again.
Until then, maybe switch to Vegemite on toast.
One more thing…
If inflation comes in hot on July 30 — say, well above 2.6% — then the RBA might wait until September.
But right now, that’s not the likely path.
Most economists are still pencilling in August 12 as the beginning of the long-awaited easing cycle.
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