March 2020 RBA Cash Rate Decision
March 2020 RBA Cash Rate
RBA board has met on Tuesday the 3rd of March 2020 for their cash rate decision and board meeting and decided to cut the official cash rate by 25 pts to 0.50%. This represents a record low cash rate for the RBA.
Australian Economy
The Australian economy and the world economy have a clouded near-term outlook with the Corona Virus expected to drag on Australian and global growth. The AUD showing weakness against the USD in recent months, coming off 11-year lows. Volatility is also showing in global markets.
Household consumption continues to be uncertain, with household income dragging on overall consumption. The labour market has been steady with the unemployment rate increasing in January to 5.3% (back up to April 2019 levels), with minimal pressure on wage growth.
Growth in Housing Market March 2020
Conditions in the Sydney and Melbourne housing markets have continued to rebound with strong price growth in the key capital cities. Growth in housing credit extended to owner-occupiers has stabilised, with FHB driving this segment with the government’s FHBS, whilst credit to investors has started to pick up in demand, this is shown in a demand for mortgage loan commitments and demand for credit.
From the last rate cut, we saw lenders pass on between 18 to the full 25 pts in a rate cut saving. Important to note this reduced the cost of variable loans, customers on fixed loans will not experience the passed on interest savings, though lenders have since repriced new fixed-rate loans. You can read more about the refinancing process or the process of purchasing a new property.
Lower mortgage rates will boost the aggregate household disposable income, which should feed into household spending.
It is yet to be seen that a rate cut would stimulate the credit and housing markets, similar to what occurred in late 2016. We have seen a bounce in some property markets post election. Recently APRA made changes to the assessment guidelines for Australian lenders, which will assist demand slightly, though lending to new borrowers remains tight.
March 2020 Inflation
Inflation across the country is expected to pick up but only gradually, but expect a target delay with the Corona Virus. Target inflation expected to be close to 2% in 2020 and 2021, currently sitting at 1.8%. These inflation targets have been revised down from previous RBA expectations, which had the inflation target at well over 2%.
The RBA board made the decision to cut the central rate by 25 points to support the Australian economy.
To Read More at the RBA: RBA Rate Decision click here — to read about last month’s decision.
Jeremy Harper is the director of hfinance. hfinance is a mortgage brokering business, to speak with a Sydney Mortgage Broker, Gold Coast Mortgage Broker or an Australian expat mortgage broker — contact by calling us on 1300 928 227 or email info@hfinance.com.au
