Rates on hold at 0.25% as Government looks to give home renovators a boost
“In these unprecedented times” is the most cliched of opening sentences right now, but it’s overused precisely because it’s true. 2020 has been an absolute rollercoaster of a year (if the rollercoaster only goes straight down) and it’s getting harder and harder to predict what the economy will do. That said, today’s announcement by the RBA to keep the official cash rate at 0.25% was expected.
In today’s statement, Philip Lowe said that global economies have all experience a “severe” downturn as they attempt to contain the pandemic.
He stated that “the Australian economy is going through a very difficult period and is experiencing the biggest economic contraction since the 1930s”. However he also noted that the depth of the downturn will be less than anticipated.
According to the RBA, 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 immediate future much will depend on how confident people feel about their health and their own finances. The RBA will do all that it can to “make sure that Australia is well placed for the recovery”.
Stimulus will be key and it looks like the Morrison government has homeowners on their radar. Some sort of home renovation stimulus package may be announced in recognition of the roll-on benefit of keeping tradies such as carpenters and plumbers busy.
The other interesting aspect that has emerged from the pandemic is that many of us have realised we can work from home more often and quite effectively. Real estate agents are expecting that many city-dwellers will look to move to more regional areas in search of a better work/life balance. It will be interesting to see how the market pans out over the rest of the year. Home isolation has given many of us opportunities to dream and plan a tree or sea-change or to imagine changing our homes to better suit our needs.
Things are different for many of us now. If you want to review your mortgage, whether it’s to negotiate a better rate or if you’re looking to refinance, contact us and we can help sort through your mortgage options – and there are plenty of options at the moment.
As for where the official cash rate is going, up or down, the answer is probably nowhere. We can expect the rate to stay on hold for the next few announcements while the RBA waits to see how things pan out. Today the Board made it very clear that the cash rate won’t go up until progress is being made towards full employment, and that seems a fair way off right now.