The Reserve Bank of Australia (RBA) has announced its first cash rate decision of the new year.
As was largely expected, the central bank has held the rate at its current record low of 0.1%, where it has sat for the past three months since the November 2020 meeting.
According to CreditorWatch chief economist Harley Dale, given that the RBA “used up its ammunition” in terms of rate cuts last year, the focus in 2021 will be on using federal and state fiscal policy to complement the record-low borrowing rates and therefore sustain the momentum of the country’s economic recovery.
“In his National Press Club address yesterday, the Prime Minister reinforced and outlined a raft of policies, including tax cuts for Small and Medium-Sized Enterprises (SMEs). Such policies are in play against a backdrop of metrics – such as Australia’s unemployment rate – being in much better shape than many feared through much of last year,” Dale explained.
For his part, managing director of mortgage aggregator Finsure Group, John Kolenda, expects to see the cash rate stay at 0.1% for at least the next two quarters as the RBA monitors the economy, assessing how factors like the end of JobKeeper in March play out.
“The [RBA] will assess the impact to small business operators and property owners facing possible hardship when support finishes,” he said.
Kolenda added that it’s likely the next cash rate movement the country sees will actually be a rate hike – but that could still be a “long way off”.
“The RBA will be closely monitoring the economic data focused on unemployment, property prices and consumer spending. If these three areas all show a rebound, then we will certainly see rates rise,” the managing director said.
As for his industry-specific advice, Kolenda has warned mortgage holders against complacency.
While new customer rates are expected to stay competitive throughout 2021, the pace of interest rate cuts on home loans has slowed considerably across lenders of all sizes, indicating Australia could be near the bottom of the cycle.
“It’s so important to ensure you are getting the most competitive interest rate available,” said Kolenda.
“Contact an experienced mortgage broker to make sure you are getting the best deal.”