Cash rate drops in uncertain times

THE Reserve Bank’s 0.25 cut to its cash rate on Tuesday afternoon is expected to offer some relief to homeowners and renew drive and confidence in the housing market. Wangaratta-based Winsec Savings and Loans managing director Tony Ruvolo welcomed the cash rate cut and said he envisages another 0.25 per cent cut in March or April. He said if there are cuts of 0.5 per cent in the next two to three months, hopefully the banks will pass them on in full, and this means the loan servicing rates will come down half a per cent. “The downward trend might give people enough confidence to go out and do something and I find that when rates are flat, not much is happening in the market,” he said. “You wouldn’t fix rates now, even though some of the banks have a good 12-month rate. “It depends on what’s going to happen, and if it’s only going to be only 0.5 per cent in the next 12 months then the fixed rate is a goer.” Impacts of the global economy are likely to continue to be the main influence on Australia’s economy. “The problem is what we do in Australia is only a blip on the radar and the impact on us is from the Ukraine, Russia, Gaza and the uncertainly around the tariffs with the US, as to whether they will be imposed or not,” Mr Ruvolo said. “The question of whether we should have more immigration, so we have more people working is another factor.” Mr Ruvolo said the cash rate drop could also prompt Prime Minister Anthony Albanese to call the election very soon. “Home loans have been quiet and our unregulated lending has been ticking over with several applications for subdivisions,” he said. “There’s still activity and we have been picking up applications which are just outside the banks’ scope.” Monash University business school, department of economics lecturer Dr Isaac Gross said the RBA was right to cut interest rates in the face of the low inflation data that came out in January. “While the labour market remains strong at around 4 per cent with inflation falling it is well on track to return to the RBA’s target band this year,” he said. “The RBA will continue to cut slowly over the course of 2025 as and when the economic data comes out. “If they get back to their natural rate this means three interest rate cuts will be delivered over the coming months.” The RBA board noted that the outlook is uncertain and growth in output has been weak, private domestic demand is recovering a little more slowly than earlier expected, and there is uncertainty around the extent to which the recovery in household spending in late 2024 will persist. "Wage pressures have eased a little more than expected, housing cost inflation is abating, and businesses in some sectors continue to report that it has been hard to pass on cost increases to final prices," the board reported.

Cash rate drops in uncertain times

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