Mozo Live: RBA cuts cash rate to 3.85%, home loan cuts keep rolling in, productivity woes plague businesses

Thanks for joining us for today’s interest rate moves. The live blog is now closed. We’ll keep you posted on major updates as they roll in.

Much of the attention has been focused on home loan interest rates amid the Reserve Bank’s decision, but some banks have also announced changes to their savings account rates.

Here’s a wrap up of what’s happening to savings accounts:

Westpac: The bonus rate on Westpac’s Life savings account will go from 4.75% p.a. down to 4.50% p.a. (0.25% cut). The eSaver account will also lose 0.25% from its intro rate, effective from 30 May.

St.George, Bank of Melbourne and BankSA: These subsidiaries of Westpac have each announced the bonus rates on their Incentive Saver and Maxi Saver accounts will be reduced by 25 basis points from 30 May.

AMP: The AMP Saver account will soon have 0.25% sliced off its bonus rate, which could bring it down to 4.70% p.a. Similarly, the bank is cutting a quarter of a percentage point off its Cash Manager account, effective from 23 May.

Credit Union SA: The provider has already cut 0.25% from the rates on its Netsave and Bonus Savings accounts, effective from 21 May.

The Reserve Bank of Australia (RBA) weighed a larger-than-expected rate cut at its May Board meeting, according to governor Michele Bullock.

During the media conference following the monetary policy decision on Tuesday, Bullock revealed that the Board swiftly dismissed holding and debated whether or not to double down on cutting the cash rate.   

“It was a consensus decision. What the Board discussed was two options – hold or lower. There was a bit of a discussion about hold and that was, sort of, put aside pretty quickly. The discussion then was about a cut and how big – and there was a discussion about 50 and 25 [basis points]. The Board was of the view that 25 was the right number on this occasion.”

Bullock added that although the RBA didn’t opt for a ‘super-sized’ rate cut in May, “this doesn’t rule out” deeper rate reductions in the future.

With economic growth showing signs of slowing, inflation within the target band and consumer sentiment still fragile, markets are now closely watching for signs of further easing in the months ahead. Analysts say the RBA's language suggests a more dovish tilt from the central bank, increasing the odds of another cut in the near term.

Just over 70% of home loan providers in the Mozo database have yet to announce if or when they’ll pass on the RBA’s interest rate cut at the time of writing.

But what can previous rate cut cycles tell us about the banks and their patterns of behaviour? We wanted to take a closer look.

When the Reserve Bank cut rates back in June 2019, more than half of lenders in our database passed on the full reduction. When a second cut was announced just one month later, that figure dropped to 15%.

By the time a third cut was announced in October 2019, only 9% of lenders passed on the rate relief to their customers.

Similarly, lenders widely passed on the pandemic emergency cuts in 2020, but by the time further decreases were announced by the RBA in November, 43% of lenders in our database refused to pass it on.

Mozo’s finance expert, Rachel Wastell, says lenders could respond differently to the RBA’s second cut of the year.

“Past performance doesn’t guarantee future behaviour, and with competition heating up, the pressure is on, so this cycle could play out differently.”

If you’re curious about the top interest rates currently available, take a look at some of the best home loans.

Providers continue to announce rate reductions, passing on the RBA's cut – in full – to borrowers. See below for a summary of adjustments:

Bank of Queensland (BoQ) will reduce variable home loan and business loan rates by 0.25% p.a. for new and existing customers, effective from 6 June 2025 (excluding commercial rate loans).

ME Bank is also lowering variable home loan rates by 0.25% p.a., starting 7 June 2025, for new and existing customers.

People’s Choice will reduce variable home loan rates by 0.25% p.a., effective 30 May 2025. They are currently finalising deposit rate changes and will communicate updates soon.

Credit Union SA is cutting savings account rates on its Netsave and Bonus Savings Accounts by 0.25% p.a., effective 21 May 2025, with the 55+ Account interest rates incurring the same cuts on 28 May 2025.

The RBA’s decision to cut the cash rate to 3.85% marks a welcome shift – the first time in two years rates have started with a “3”. As Employment Hero chief Ben Thompson puts it, “Everyday Aussies and businesses can breathe a sigh of relief knowing that costs are starting to cool.”

But beneath that relief lie warning signs. Employment Hero’s latest data shows wages are up 5.9% year-on-year and 1.8% month-on-month. “It seems like great news on the surface,” Thompson says, “but it’s concerning when you compare that growth to productivity.” Hours worked fell 1.7% over the past month and haven’t moved from this time last year – suggesting early signs of AI-driven efficiency or, more worryingly, businesses paying more for less.

“If we want wage growth to stick without stoking inflation, we need more than rate cuts,” Thompson warns. He says focus must shift to improving productivity by cutting red tape, reducing compliance burdens, and empowering businesses to evolve and invest in better ways of working.

Rate cuts ease short-term pressures, but lasting stability requires reform.

See coverage from RBA Day and read in-depth analysis of the decision.

Good morning and welcome back to Mozo’s live coverage of the RBA’s latest monetary policy decision. On Tuesday, Australia’s central bank reduced the cash rate by 25 basis points (bp) to 3.85%.

Yesterday, a number of banks – including the Big Four – revealed that they would be passing on rate cuts to customers. You can see our live coverage from RBA Day and read our in-depth analysis of the decision.

Throughout the evening more lenders announced home loan rate cuts.

AMP said it would lower variable lending rates for owner occupiers and investors by 0.25 percentage points, effective 30 May for new customers and 2 June for existing mortgage holders. However, it's not all good news. Deposit rates will also come down by 25 basis points from 23 May.

Here’s a snapshot of the latest reductions:

• UBank – 25bp cut, effective 29 May
• Newcastle Permanent – 25bp cut, effective 30 May
• Heritage Bank – 25bp cut, effective 30 May
• Bank Australia – 25bp cut, effective 2 June
• HSBC – 25bp cut, effective 2 June
• RACQ Bank – 25bp cut, effective 3 June
• Regional Australia Bank – 25bp cut, effective 4 June
• Pepper Money – 25bp cut, effective 5 June
• Virgin Money – 25bp cut, effective 6 June

While these reductions signal relief for borrowers, they also highlight how competitive the lending market has become. With more lenders adjusting rates, now could be a smart time for homeowners to review their current loan and compare refinancing options.