The Reserve Bank of Australia (RBA) will keep interest rates on hold in September amid higher unemployment and the Stage 4 lockdown in Victoria.

The Reserve Bank of Australia (RBA) has announced the official cash rate for September, amid higher unemployment, stage 4 lockdown in Victoria and a soon-to-be-reduced JobKeeper payment.

Despite some economic woes, the central bank has acted as most economists previously predicted, holding the official cash rate at 0.25 of a percentage point for the sixth straight month.

Speaking before the announcement, AMP’s chief economist, Dr Shane Oliver, predicted the RBA will hold rates until government benefits completely expire in March 2021.

“For now the RBA will remain on hold. It views the March monetary easing package as continuing to help the economy and the main action now being in fiscal policy,” Dr Oliver said.

The chief economist pointed out the potential of future cash rate changes after the JobKeeper completely ends in March.

“There is a significant chance it may cut the cash rate to 0.1 [of a percentage point] and it may do more aggressive quantitative easing, but that would not be for several months,” he said.

“And it remains ‘extraordinarily unlikely’ to cut the cash rate below zero.”

Staying lower for longer

Dr Oliver explained savers better get used to a reduced rate as the economic recovery from the COVID-19 pandemic will be years away.

“The next interest rate move of significance is likely to be a hike, but with high unemployment and underemployment, lots of spare capacity in the economy and underlying inflation way below target, this is at least three years away,” Dr Oliver said.


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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.