The Reserve Bank of Australia has announced its official cash rate decision for October following its monthly board meeting. The central bank announced that it has once again held the official cash rate at the historic low of 1.5 per cent. Prior to the RBA ‘s announcement, economist at Corinna Economic Advisory, Saul Eslake, noted that while economic growth is “above trend”, weaker than expected labour market and inflation indicators would dissuade the central bank from lifting the cash rate. “[The] RBA has made it increasingly clear that it is in no hurry to start raising rates,” Mr Eslake said. “Although economic growth is now running ‘above trend’, unemployment and underemployment are still higher than the RBA wants, and inflation is lower than the RBA wants, and it expects progress on both of these fronts to be only ‘gradual’.” Mr Eslake also claimed that the RBA “seems unconcerned” by out-of-cycle rate increases from lenders, including three of the big four banks. Mortgage Choice spokesperson Jacqueline Dearle added: “I expect the RBA to hold the official cash rate at 1.5 per cent in October due to a combination of factors close to home, such as low inflation, an acceptable unemployment rate and stagnant wage growth.” Ms Dearle also claimed that US President Donald Trump’s new wave of tariffs on Chinese imports, and the effect that rising funding costs may have on Australian mortgage rates, could also have an influence on the RBA’s economic forecasts. “On an international level, [President Trump’s] trade tariffs on Chinese imports may create a drag on global growth, which may impact on the Australian economy and jobs,” the spokesperson said. “Additionally, further upward pressure on the cost of wholesale borrowing for our own financial institutions is expected, as US Federal Reserve chairman Jerome Powell has told Congress he wants to increase America’s interest rates. “This may result in further out-of-cycle rate rises which will have a ripple effect across our economy and impact Australian property owners. Combined with tightened lending standards and a softening housing market, this will also help anchor the rate for now.” Further, despite also predicting a rate hold, senior economist at AMP Capital Shane Oliver warned: “While economic growth ran above trend over the year to the June quarter and growth should be supported by business investment, infrastructure spending and exports going forward, uncertainty remains around the outlook for consumer spending, house prices are likely to fall further and wages growth and inflation remain low.” 1300HomeLoan managing director John Kolenda also made reference to the continued uncertainty brought about by the financial services royal commission, stating that the RBA should “help navigate” the economy “through these uncertain times”. He added: “The royal commission is still a factor and we have other elements such as the US-China trade war, downward pressure on the property market and the federal election looming which all influence consumer confidence in a negative way, troubling our economic conditions. “Lenders have already raised their rates out-of-cycle. If the RBA followed suit that would only be detrimental to consumer confidence in a falling housing market.” Moreover, while also predicting a hold, Dr Andrew Wilson from My Housing Market stated that the case for a rate cut from the RBA may be “strengthening”. “Although recent data remains positive overall with lower jobless rate, declining budget deficit and a steadying dollar, concerns are increasing regarding rising trade barriers imposed particularly by US and China. “Increased fuel costs will also be concerning the RBA, with wages yet to rise as expected. Rates will remain on hold and the case for a near-term cut — although clearly an outside chance — is strengthening.” However, CoreLogic’s head of research, Tim Lawless, added: “Cutting the cash rate would likely provide further support to economic conditions, but could also risk refuelling growth in housing prices, as was the case in 2016 when the cash rate was cut by 50 basis points between May and August.”
Rands Financial Services is not an only a Mortgage Broking Firm but also CPA Accountants and owns a Registered Tax Agency. Therefore, our advice and assistance are more comprehensive than an average broker.
Therefore we always explain the options in details and clarifying any doubts, make appointments at a place and time convenient to you. Moreover, we update you with news often and revisiting your financial situation and continuously looking out for products which will reduce your interest at different stages of life.