RBA cuts rates - But is AI the real threat to Australia's economy?
After three interest rate cuts in just six months, the Reserve Bank has sent a clear signal: inflation is under control, and the easing cycle is here.
In my previous role as an economist at the Federal Treasury, I saw firsthand how productivity has been at the centre of Australia's economic agenda for decades, yet the ambitious targets have rarely been met.
This week, the one key theme I am sharing with home buyers, sellers, and investors with Flint Group, one of Australia's fastest growing mortgage brokerages, is that the RBA's latest move is not just about lower repayments.
It has also begun a bigger national conversation about productivity, living standards, and whether now is the moment for reform.
Productivity takes centre stage
Yesterday's 0.25 per cent cut took the cash rate down by 0.75 per cent since February. That was expected by markets, but what was not expected was the RBA's downgrade to its productivity growth assumptions for the next two years.
In plain English, productivity is how much more we can produce without adding extra labour or capital.
Higher productivity means higher real wages and better living standards without fuelling inflation. Lower productivity means the opposite, slower growth and tighter household budgets.
Governor Michele Bullock made it clear this is not a permanent downgrade, but it is an important reality check.
The RBA had been hitting its inflation and jobs targets but consistently overestimating GDP and consumption. The culprit was an overly optimistic productivity assumption.
A reform moment?
Next week's national Economic Roundtable brings together policymakers, economists, and business leaders to focus on exactly this issue.
With inflation easing, rates falling, and the spotlight firmly on productivity, the big question is: can this moment kickstart the reform agenda our country desperately needs to lift living standards?
There is also a wild card in the mix, the rise of artificial intelligence.
Some believe AI could spark a step change in productivity, transforming industries and boosting output dramatically. Others are sceptical, warning the benefits will take time and may not reach all sectors equally.
The RBA is not betting on an AI boom just yet, but it is a key uncertainty that could reshape our economic future.
What this means for buyers and sellers
Mortgage holders: Another cut means slightly lower repayments, and the RBA is signalling the possibility of more easing ahead. This can free up household cash flow and improve borrowing capacity.
Property market: The RBA acknowledged housing is a key channel through which monetary policy works. Lower rates boost buyer confidence, spur activity, and support construction. So far, the rebound has been measured, but momentum could build quickly.
Investors: Easing rates lift serviceability, reduce financing costs, and often drive early capital growth as sentiment improves.
My message right now
This is the time to revisit your borrowing power. Conditions are shifting quickly, and many Australians who felt constrained earlier this year may now be in a much stronger position than they realise.
The property market tends to move ahead of official rate cuts, and confidence is already returning.
If you wait until the reform debate is settled or AI delivers its promised gains, you may miss the early mover advantage.
Whether you are buying, selling, or investing, act strategically but do not stand still. The landscape is changing, and right now, opportunities are emerging.
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