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How the Latest RBA Cash Rate Cut Shapes Business Growth Strategy

On 12 August 2025, the Reserve Bank of Australia (RBA) cut its official cash rate by 0.25% to 3.60%, its third reduction in six months — bringing much-needed relief to individual and business borrowers ^[1]. For businesses, however, the story runs deeper. While cheaper finance can unlock new opportunities, persistently weak productivity — forecast at just 0.7% annually — signals the need for careful, strategic use of this relief.

Broader Economic Context for the RBA Rate Cut

Inflation & Growth: After peaking at 7.8% in late 2022, headline inflation has fallen to around 2.1% by mid-2025 ^[5]. This is well within the RBA’s 2–3% target range. However, GDP growth has slowed markedly, with the economy expanding by just 0.2% in Q1 2025, and forecasts for national growth cut to 2.0% annually ^[2].

Labour & Monetary Outlook: Unemployment currently sits at 4.3%, the highest in nearly four years ^[5]. Yet the RBA remains confident inflation and employment can be managed with further cuts if needed, suggesting rates may return to the 2–3% band by 2026 ^[2]. For businesses, this balance of relief and risk underscores the importance of resilient planning.

RBA Rate Cut – Implications by Business Size

Small Businesses

For small businesses, immediate relief is already flowing through. Macquarie Bank, for instance, passed on the latest cut in just three days — faster than the industry average ^[3]. Lower repayments provide critical cash flow relief, enabling owners to cover expenses, invest in stock, or build a small buffer during uncertain times.

Medium Businesses

Mid-sized firms have greater scope to leverage falling rates. Refinancing existing debt can free up significant cash flow, while lower borrowing costs provide a catalyst for investment in systems, equipment, or additional personnel. These moves can improve efficiency and set businesses up for growth when demand strengthens.

Large Corporates

For corporates, the rate cut improves access to capital markets by lowering bond yields and reducing borrowing costs. This is particularly attractive for major projects, acquisitions, or international expansion. However, firms with offshore debt must also navigate foreign exchange pressures and global rate movements, which can offset some of the domestic gains.

Strategic Responses for All Businesses

Regardless of size, there are common strategic responses:

• Update financial models: Reflect reduced debt costs in budgets and forecasts.
• Reallocate freed-up capital: Decide whether to prioritise growth initiatives, operational efficiencies, or financial buffers.
• Productivity focus: With the RBA calling for reform, businesses should invest in automation, workforce skills, and process improvements to counteract weak productivity growth ^[2].

Policy & Business Improvement Considerations

The RBA’s repeated warnings on productivity highlight the need for systemic reform ^[1][2]. This opens the door for businesses to engage with advisers, industry roundtables, and government consultations. SMEs and corporates alike can play a role in shaping policy and securing better long-term conditions.

At the business level, professional advisory support — including cash flow planning, debt restructuring, and growth modelling — can make the difference between simply riding out the current cycle and achieving sustainable performance.

Tactical Action Plan

Depending on the size of your business, there are some important steps you can take now in the wake of the RBA rate cut in the short, medium and long term.

Short-Term

• Refinance existing loans at lower rates.
• Renegotiate terms with lenders.
• Adjust forecasts for reduced debt servicing costs.

Medium-Term

• Factor cheaper debt into strategic budgets.
• Allocate capital to expansion, efficiency, or marketing initiatives.
• Strengthen risk management frameworks.

Long-Term

• Invest in automation and technology.
• Build organisational capability and workforce development.
• Embed continuous improvement to buffer against systemic productivity pressures.

Conclusion

The RBA’s move to 3.6% is a welcome reprieve for borrowers. Yet it comes at a time when productivity challenges threaten the resilience of the Australian economy. Businesses that seize the opportunity to refinance, reinvest, and improve efficiency will be best positioned to thrive — not just in this cycle, but for the long haul.

If you are considering expansion, refinancing, or simply want clarity on your financing options, now is the right time to explore your options. The Business Improvement and Finance teams at McKinley Plowman can help you evaluate opportunities, secure the right facilities, and future-proof your business. Call us today on (08) 9301 2200 or contact us here.

References & Further Reading

1. The Guardian (2025) – Relief for borrowers as RBA cuts cash rate to 3.6%. Accessed August 2025: https://www.theguardian.com/australia-news/2025/aug/12/rba-interest-rates-decision-relief-for-borrowers-as-reserve-bank-cuts-cash-rate-to-36
2. Reuters (2025) – Australia’s central bank downgrades economic outlook, productivity speed limit. Accessed August 2025: https://www.reuters.com/world/asia-pacific/australias-central-bank-downgrades-economic-outlook-productivity-speed-limit-2025-08-12/
3. ABC News (2025) – Big Four banks react to RBA’s decision to cut rates. Accessed August 2025: https://www.abc.net.au/news/2025-08-12/banks-react-to-august-rba-rate-cut-decision/105506412
4. Broker News (2025) – Lenders move fast after RBA’s third rate cut of 2025. Accessed August 2025: https://www.brokernews.com.au/news/breaking-news/lenders-move-fast-after-rbas-third-rate-cut-of-2025-287790.aspx
5. AP News (2025) – Australia’s central bank cuts interest rate for third time this year to 3.6%. Accessed August 2025: https://apnews.com/article/australia-interest-rate-reserve-bank-6b2f49f984e0434dccf94aaed35323f8
6. Ausloans (2025) – The RBA Cuts Cash Rate to 3.60%—What It Means for Your Loans. Accessed August 2025: https://www.ausloans.com.au/articles/rba-cut-cash-rate-august-2025

written by:

Mark Crowther