At its August monetary policy meeting, the RBA handed down its fifth cash rate call of the year.

The central bank has cut interest rates by 25bps, bringing the cash rate target to 3.60%.

The decision was unanimous, with the entire board voting to cut.

Borrowers are likely to feel a slight relief from the reduced rates as lenders begin to implement the changes.

The latest CPO data saw inflation fall to 2% and trimmed mean inflation, which is an indicator for underlying inflation, fall to 2.7%. This was the ammo the RBA needed to follow through with a rate cut.

Economists, including the big four banks, were widely expecting this outcome. However, after the last shock upset in July, there was still some cautiousness.

Industry heads react

Figureheads of the industry have reacted to the cut, with sentiments in support of some relief for borrowers.

The cut will benefit this massive cohort of borrowers. For those on fixed rates, refinancing is likely to follow.

The cut will benefit the housing market as it will boost borrowing capacity, lift buyer sentiment, and re-energise demand.

In the non-bank space, certainty fuels confidence, and confidence creates momentum. We’re already seeing further improvement in borrower appetite to buy, refinance, or invest.

For SMEs, the rate cut will open opportunities for consolidation and refinancing, providing some much-needed extra cash.

Despite this, there are still challenges that will persist.

Some sectors, like hospitality, will still face hurdles, with lenders cautious about newer operators and rate cuts alone won’t improve access to credit, ongoing confidence will be essential to unlock growth.

The rate cut is not a silver bullet for borrowers.

However, it provides some psychological relief and could help to stimulate consumer confidence.

There is room for one or two more cuts this year.