RBA cuts rates to new record low
THE official cash rate has been cut by 15 basis points to a new record low of 0.10 per cent by the Reserve Bank of Australia today.
RBA Governor Phillip Lowe said in a speech on Tuesday, the monetary decision reflects the RBA’s commitment to supporting the Australian economy as it recovers from COVID-19.
“The Board views addressing the high rate of unemployment as a national priority and it wants to do what it can to support job creation.
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“Importantly, today’s decision complements government efforts to support the Australian economy and to lower unemployment.
“For the Reserve Bank’s part, we have kept borrowing costs low and the financial system very liquid and supported the supply of credit to the economy.
“This broad economic policy response and Australia’s progress on the health front have meant that the Australian economy is in a better shape than many others.”
Addressing the rate cut, Treasurer Josh Frydenberg said it is good news for businesses, households and people with mortgages.
“For someone with a $400,000 mortgage, the average across the country, what we have seen with today’s announcement where it has come from down 75 basis points to just 10, that is worth $1,000 a year for someone with a mortgage that size,” Mr Frydenberg said.
But it could mean “tough news for savers who have put money in the bank”.
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Mr Lowe said in reaching today’s decision, the Board considered effects on medium-term financial and the impact on savers.
“The Board recognises that low rates can encourage some additional risk-taking, as investors search for yield. It also recognises that low deposit rates can create difficulties for some people. These issues will need to be closely watched over the months ahead.
“But the Board judged that the bigger risk at the moment was the threat to our economy and to balance sheets from an extended period of high unemployment. Today’s decision will lessen that risk.”
The RBA has reduced the cash rate six times now but Mr Lowe said the RBA is not out of firepower.
“We have additional monetary policy options and we are prepared to use them if the circumstances require.
“In terms of interest rates, I think we have gone as far as it makes sense to do so in the current environment.”
It was reported the treasurer expects the banks to pass on the new rate cut in full but changes are yet to be announced by major banks.
