The RBA said inflation has fallen “substantially” since the peak in 2022, with underlying inflation at 3.2 per cent in the December quarter, which was “more quickly than expected”.

But it said “upside risks remain” and the board remains “cautious” about easing the official cash rate further.

This is because “the labour market may be somewhat tighter than previously thought” — labour underutilisation has declined, and business surveys and liaisons suggest the availability of labour is still a constraint for a range of employers, according to the bank.

The RBA is also concerned Australians will be spending more cash now in response to the 0.25 per cent cut announced today.

It referenced pronounced “geopolitical and policy uncertainties”, not naming US President Donald Trump’s tariffs as factors that could influence global markets and future rate decisions.

Ultimately, the RBA is sticking to its line that returning inflation to its target of between 2-3 per cent is its priority.

It acknowledged that monetary policy has been “restrictive” but says it will “remain so”.

— Madeleine Wedesweiler