Aussies have been told to expect low rates for some time, and the Reserve Bank is sticking to its guns by leaving the cash rate at a record low.
At its monthly meeting on 2 June the Reserve Bank of Australia has kept rates on hold at 0.25 per cent as was widely expected.
The official cash rate will remain at its current historic low for at least another month after the Reserve Bank voted to keep interest rates on hold at 0.25 per cent today.
At its June meeting this afternoon, the RBA decided to adopt a wait-and-see approach which had been widely expected by economists.
In a statement, RBA governor Philip Lowe said the decision was made as the global economy experienced a “severe downturn” as countries tried to contain the coronavirus.
“Many people have lost their jobs and there has been a sharp rise in unemployment,” Dr Lowe said.
“Over the past month, infection rates have declined in many countries and there has been some easing of restrictions on activity. If this continues, a recovery in the global economy will get under way, supported by both the large fiscal packages and the significant easing in monetary policies.
“Globally, conditions in financial markets have continued to improve, although conditions in some markets remain fragile. Volatility has declined and credit markets have progressively opened to more firms. Bond rates remain at historically low levels.”
Dr Lowe said the Australian economy was going through a “very difficult period” and was experiencing “the biggest economic contraction since the 1930s”.
“In April, total hours worked declined by an unprecedented 9 per cent and more than 600,000 people lost their jobs, with many more people working zero hours. Household spending weakened very considerably and investment plans are being deferred or cancelled,” he said.
“Notwithstanding these developments, it is possible that the depth of the downturn will be less than earlier expected. The rate of new infections has declined significantly and some restrictions have been eased earlier than was previously thought likely. And there are signs that hours worked stabilised in early May, after the earlier very sharp decline. There has also been a pick-up in some forms of consumer spending.
“However, the outlook, including the nature and speed of the expected recovery, remains highly uncertain and the pandemic is likely to have long-lasting effects on the economy. In the period immediately ahead, much will depend on the confidence that people and businesses have about the health situation and their own finances.”
The Reserve Bank of Australia 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.
Dr Lowe previously ruled out a move towards negative interest rates, and has insisted rates will remain at low levels for the foreseeable future.
“I said previously that it was extraordinarily unlikely that we would have negative interest rates, and there’s been no change to that thinking,” Dr Lowe said in May.
Given Dr Lowe’s comments around unlikely negative interest rates many economists believe variable home loan rates may have reached the bottom.
With variable and fixed home loan rates at historical lows, now may be the time to look at your home loan deal, or even consider fixed rates.
LJ Hooker Home Loans lending specialists offer a free in depth review of your current home loan and what options may be available to you in the market. From there you can make the right decisions in relation to your personal finances.
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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.