In a strong effort to stabilise Australia’s COVID-19 economy, the Reserve Bank of Australia (RBA) maintained its cash rate of 0.25 per cent in its September meeting. The cash rate has now sat at 0.25 per cent since March.
This week, RBA governor Philip Lowe stated the bank wouldn’t increase the cash rate target until progress was being made towards full employment. In the meantime, Mr Lowe said the RBA was confident that inflation would sit sustainably within the 2–3 per cent target band.
However, according to Mr Lowe, the RBA’s central scenario could see the unemployment rate rising to around 10 per cent later this year before gradually declining to around 7 per cent in two years’ time. As well, inflation is expected to average between 1-1.5 per cent over the next few years.
Mr Lowe also repeated his words from the RBA’s August meeting, saying while Australia’s economy was experiencing its biggest contraction since the 1930s, the downturn was not as severe as earlier expected and a recovery was now under way. However, with Victoria still struggling amidst the pandemic’s second wave, this recovery would be particularly uneven and bumpy.
The good news is the 0.25 per cent cash rate means borrowing rates are at historical lows and as such, should stimulate household spending now and into the future while assisting consumer confidence. This combination is where we, your real estate agents, hope the market will improve overall, particularly with calendars now switching over to our traditionally busy spring season.
If you’re a home owner with a variable interest rate mortgages or a potential buyer considering such a mortgage, call your lender to check you’re still enjoying the best deal possible. Compare their offer to other home loans and if need be, refinance your loan.
The record low cash rate can be of great benefit to you and your budget but you should always be 110 per cent certain that your mortgage is in great hands. Good luck – and until RBA’s next cash rate decision on October 6, stay well and healthy!