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RBA Cash Rate Decision August 2019

RBA board has met on Tuesday the 6th of August 2019 for their cash rate decision and decided to keep the rate unchanged at 1%. This represents a record low cash rate for the RBA.

Growth in Housing Market

Conditions in the Sydney and Melbourne housing markets have continued to remain soft but recently the pricing has stabilised with green shoots. Growth in housing credit extended to owner-occupiers has stabilised, whilst credit to investors has remained subdued.

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. You can read more about the refinancing process or the process of purchasing a new property.

It is yet to be seen that a rate cut would stimulate the credit and housing markets, similar to what occurred in late 2016. Recently APRA made changes to the assessment guidelines for Australian lenders, which should assist in the demand for new housing credit.

Australian Economy

The Australian economy grew below-trend at 1.6% to June 2019 quarter. Increased investment in infrastructure to provide an offset to this. Household consumption has been affected by a weakness in housing markets and low-income growth. The labour market is strong with the unemployment rate is 5.2%, though this has ticked up recently – but is expected to reduce to 5% over the next couple of years.

Inflation

Inflation across the country has been lower than expected, with target inflation for 2% by 2020. These inflation targets have been revised down from previous RBA expectations.

The RBA board made the decision to leave the cash rate unchanged at 1%, with the expectation of an extended period of low-interest rates, to assist in a further reduction in unemployment and achieve the revised inflation target.

Impact on Australian Expats

Rates continue to be at historic lows and the RBA hinted at an extended period of low-interest rates. Australian Expats who currently hold an Australian mortgage should contact us to review their loan – to ensure they are taking advantage of the interest savings.

To Read More at the RBA: RBA Rate Decision or about the July decision.

You can contact us, to continue the conversation.