August 04, 2020
The Reserve Bank of Australia (RBA) has today made the decision to keep the nation’s official cash rate on hold at 0.25% at its August monetary policy meeting.
Mortgage Choice Chief Executive Officer, Susan Mitchell said, “Today’s decision marks the fifth consecutive month that the RBA has kept the cash rate unchanged. The second wave of the COVID-19 pandemic and subsequent stage 4 lockdown in Melbourne may force the RBA to provide further stimulus, however Governor Lowe made it clear in a recent speech that negative interest rates are extraordinarily unlikely. All eyes will be on the Bank’s Statement on Monetary Policy released on Friday where the Board is expected to revise its growth forecasts.”
“The historic low cash rate continues to support a low cost of borrowing for Australians, which combined with Government incentives appears to be cushioning the pandemic’s impact on the nation’s housing market for now.”
“The latest CoreLogic Hedonic Home Value Index revealed that Australian dwelling values fell 0.6% in July, led by Melbourne and Sydney, which recorded declines of 1.2% and 0.9% respectively. As the virus continues to put a strain on household budgets and consumer sentiment we are likely to see further deterioration in the months ahead.”
“The Westpac Melbourne Institute Index of Consumer Sentiment fell in July to the weak levels seen in May. This is unsurprising given the survey was undertaken the week in which the lockdown was announced in Melbourne.”
“National Australia Bank’s Monthly Business Survey revealed that business conditions remain deeply negative and well below average after recording some improvement. That being said, the survey was conducted just prior to the reintroduction of lockdowns in Victoria,” said Ms Mitchell.
In the minutes of the July monetary policy meeting, RBA board members determined they would not increase the cash rate target until progress was made towards full employment and inflation was sustainably within the Board’s target band.
Ms Mitchell said, “The latest data from the labour market indicates that an increase to the cash rate is a long way away. The Australian Bureau of Statistics (ABS) revealed that the unemployment rate rose to 7.4% in June. Given the uncertainty surrounding Australia’s economic recovery, the outlook for the labour market remains challenging. The ABS also revealed that the Consumer Price Index (CPI) fell 1.9% in the June 2020 quarter, which is the largest quarterly fall in the 72 year history of the index.”
“There is no doubt that we are living in trying times but we are currently in a buyer’s market, which means there are opportunities for those looking to purchase, including first time buyers. I would encourage Australians who are in a financial position to buy property to speak to their local mortgage broker to ensure they are putting their best foot forward when applying for a home loan,” concluded Ms Mitchell.