An aggregator head has addressed the growing speculation that the Reserve Bank of Australia (RBA) may execute another cut to the cash rate at its monthly board meeting held next week on Tuesday, 6 October.
According to Finsure Group managing director John Kolenda, cutting the official interest rate from its current record low of 0.25% would have “little impact” on the economy without being combined with additional action, and would be a premature decision.
“While further rate reductions might be a welcome relief for mortgage holders, it won’t necessarily help the economic recovery,” Kolenda said.
“We need further investment into the economy from the federal government by way of more economic stimulus, infrastructure spending, tax reform and business incentives.”
Despite the forecasts another cut could be coming next week gaining in momentum, Kolenda sees it as ‘unlikely’ the RBA would take such bold action on the same day the federal government is unveiling the federal budget and elaborating on its pathway to recovery from the COVID-19 recession.
Rather, the aggregator head believes it would be more prudent for the RBA to absorb the federal budget measures before making any moves, and potentially reconsider a further reduction at its subsequent meeting on 3 November.
Kolenda also made sure to emphasise that mortgage holders should be seeking a better deal from their lenders regardless of whether or not the RBA makes a change – even consumers who have been on a six-month repayment holiday.
“We are still in a highly competitive lending market and banks will offer a better deal if you are ready to resume repayments,” he said.
“Do not be complacent about the interest rate you are currently paying as this can potentially cost you a lot of money. If you are still paying a variable interest rate with a ‘3’ in front of it then it’s time to take immediate action.”