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RBA Rates Update August 2020

04.08.20 | Marc Barlow | Reserve Bank Announcements

Rates remain at 0.25% as RBA as economy weathers Covid-19 storm


At today’s meeting the Reserve Bank decided to keep the cash rate at 0.25%. The rate has been stable at this record low for 4 consecutive months, following 2 rate cuts and a program of quantitative easing in March in response to Covid-19.


The decision to maintain the rate at 0.25% comes as no surprise with most economists suggesting the RBA will hold it at this rate for the rest of the year, if not longer.  Governor Philip Lowe has flagged that a further rate cut may be possible if required to support the economy. If this is the case it’s likely the rate will drop to an unconventional but solid 0.10%.


In today’s announcement, Governor Lowe emphasised that the Bank’s current strategy, implemented by the dual cuts in March, is working as expected. He notes that despite a ‘severe contraction’ in the economy and the rising number of Covid-19 cases both here and globally, the economic downturn has not been as severe as it might have been. Overall the Australian economy began to recover well from the first wave of the virus, but he also notes that the road to recovery will be bumpy and unpredictable. This is highlighted by the current state of disaster in Victoria.


The reintroduction of restrictions across Victoria will severely dampen economic activity in that state, and across Australia, for the next few months at the very least. With restrictions returning to NSW, SA and QLD it’s clear that the road ahead will be bumpy, but the RBA is remaining fairly optimistic. The RBA is expecting the unemployment rate to rise to at least 10% before slowly falling down to around 7% over the next few years. With consumer confidence taking an understandable blow it’s also highly unlikely that the inflation rate will rise to the RBA’s sweet spot of between 2-3%. Given that these are the 2 main factors that will determine the next rate rise, the official cash rate won’t be rising any time soon.


For homeowners, a low interest rate is of some comfort. Banks are continuing to offer flexible solutions to customers facing financial difficulties. It’s worth checking your rate of interest on your loan and making sure you’re getting a good rate. If you are experiencing financial hardship, speak to your bank, or us. There may be solutions that can help. Contact us to review your current mortgage to make sure you’re getting the best deal for you and your situation.