No surprises as RBA keeps rates on hold
No surprises as RBA keeps rates on hold
The Reserve Bank of Australia has kept the official cash rate at its record low of 0.1 per cent, and says it expects it to remain at that level until 2024 at the earliest.
The RBA’s decision was in line with the expectations of all 41 experts and economists surveyed by Finder in its latest RBA Cash Rate Survey.
RBA governor Philip Lowe said while the Australian economy’s recovery had been stronger than previously expected and was likely to continue, the central bank would nonetheless keep rates at record lows to continue to support that recovery.
“The current monetary policy settings are continuing to help the economy by lowering financing costs for borrowers, contributing to a lower exchange rate than otherwise, supporting the supply of credit needed for the recovery and supporting household and business balance sheets,” Dr Lowe said.
"The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.
“For this to occur, wages growth will have to be materially higher than it is currently.
“This will require significant gains in employment and a return to a tight labour market. The Board does not expect these conditions to be met until 2024 at the earliest.”
Research from RateCity.com.au showed that banks’ interest rates were stabilising, following a flurry of fixed-rate cuts when the official cash rate was slashed to its record low in November.
Since January 1, 17 lenders have cut home loan rates, across a total of 230 housing finance products, with 53 lenders offering home loan rates of less than 2 per cent.
“We could see one or two lenders challenge the current lowest rate, but the cuts have slowed considerably,” RateCity research director Sally Tindall said.
“It’s likely we’re nearing the bottom of the cycle, provided the economic recovery stays on track and the RBA can keep the cash rate above zero, as planned.”
However, Ms Tindall said lenders were not handing out the record low rates to all customers, rather it was new borrowers that were benefiting the most.
“Even then, you often have to be an owner occupier with a decent amount of equity in your home,” she said.
“The latest ABS Lending Indicator data shows 237,632 people have refinanced since the start of COVID, however, last month’s figures are down considerably from the May 2020 peak.
“There are still likely to be hundreds of thousands of home-owners that can significantly benefit from refinancing, or, at the very least, by picking up the phone to their own bank.”
Finsure managing director John Kolenda said the windback of COVID-19 related stimulus, such as JobKeeper, would be a determining factor for any potential move by the RBA.
Mr Kolenda said the RBA would assess the impact of JobKeeper finishing up on small business operators and property owners.
“The stimulus packages which have enabled businesses impacted by COVID to receive subsidies from the federal government to continue paying their employees has been a great success,” Mr Kolenda said.
“Without JobKeeper and other measures, the unemployment rate could have been well over 10 per cent.
“But the latest figures for December, 2020 show the nation's unemployment rate had dropped to 6.6 per cent as 30,000 more Australians found work in the wake of the pandemic.”
Finder head of consumer research Graham Cooke, however, said that while experts were confident employment markets were robust enough to ride out the rest of the pandemic, concerns were again emerging around housing affordability.
Mr Cooke said Australia’s record-high median house prices had led to a 12-month low in sentiment about housing affordability.
“A combination of record-low interest rates, reduced supply, government stimulus and bolstered savings has pushed sale prices north and climbing,” Mr Cooke said.
“Potential buyers who have been sitting on the fence should act sooner rather than later based on these results.”