RBA Cash Rate remains at 0.25%

The RBA have kept interest rates at their record low of 0.25%, the level they have remained at since March. 

This decision comes as Australia battles the challenges of COVID-19 and the subsequent economic fallout. 

Most experts are in agreement that rates won’t increase until 2022 – as low wage growth, inflation and employment present major economic challenges. 

“We have years of low interest rates ahead of us and the banks themselves have sharpened their pencils in recent times, cutting their rates on various products to remain competitive,” Leanne Pilkington of Laing + Simmons said.

“The pandemic continues to cast a shadow over the economy and the outlook is meagre, but for those whose income remains secure, a real estate purchase is comparatively affordable at present.”

The national house price index fell 0.7 per cent in June, marking the second consecutive fall in value after it fell 0.4 per cent in May.

In a statement delivered on the 7th July 2020, the RBA explained their decision:

“At its meeting today, the Board decided to maintain the current policy settings, including the targets for the cash rate and the yield on 3-year Australian Government bonds of 25 basis points...Globally, conditions in financial markets have improved. Volatility has declined and there have been large raisings of both debt and equity. The prices of many assets have risen substantially despite the high level of uncertainty about the economic outlook. Bond yields remain at historically low levels.”

“...The substantial, coordinated and unprecedented easing of fiscal and monetary policy in Australia is helping the economy through this difficult period. It is likely that fiscal and monetary support will be required for some time.

The Board is committed to do what it can to support jobs, incomes and businesses and to make sure that Australia is well placed for the recovery. Its actions are keeping funding costs low and supporting the supply of credit to households and businesses. This accommodative approach will be maintained as long as it is required. The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.”

It is not all bad news for the Australia property market, as asserted by David Milton of CBRE Residential, “there are enormous positive benefits to buying now thanks to the current low interest rates, and all financial forecasts are saying that they’re going to stay this low for the next 2 to 3 years – it’s never been cheaper to buy.”

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