The Reserve Bank of Australia (RBA) has set the March cash rate, following a week of economic tumult with growing concern over coronavirus causing the ASX200 to fall over 10%.
Australia's official cash rate is now at a record low of 0.50%, having been reduced by a further 25 basis points (bps).
“Today’s cut may not seem [unexpected] now, but just a few days ago, it did,” said Graham Cooke, insights manager at Finder.
“To put in perspective how improbable this all is, last Friday, oddsmakers placed the chance of a 25bps cut as less likely than when 15-year-old Coco Gauff beat Serena Williams in the first round at Wimbledon in 2019.”
“What a difference a week makes.”
To Cooke, the RBA’s decision this afternoon really “came down to timing”.
When Finder polled experts last week to determine the likelihood of the ASX losing 10% by the end of the year due to coronavirus, only half saw it as likely.
“By the time we had analysed survey results on Friday evening, the ASX200 had already lost 10%,” said Cooke.
“That would be like if the average home lost $50,000 of value in a week.”
AMP Capital’s Shane Oliver was among those to correctly predict today’s outcome.
“The coronavirus outbreak coming on the back of the bushfires is likely to see the economy go backwards this quarter, which in turn is likely to push unemployment up further after the rise to 5.3% seen in January,” he explained.
“Growth should rebound in the March quarter but given…we are so far from full employment and the inflation target, the RBA is likely to cut the cash rate again in the months ahead.”
In light of the all-time low official cash rate, mortgage brokers are being urged to take initiative and engage in discussions about the potential savings it affords with their customers.
Loan Market executive chairman Sam White said, “Brokers will be highlighting scenarios for repricing or refinancing with their customers this week, following today’s 25bps cut to the cash rate.
“Customers have felt uncertain this week as the global market responds to [coronavirus]; but what they can have certainty of, is that their broker is saving them time and money by securing the best interest rate or product for their needs in the current marketplace.
“It’s at times like these – when global issues place pressure on markets – that clients look to their experts for guidance and reassurance.”