World News – UA – Reserve Bank cuts rates to another all-time low, doesn’t expect them to hike for three years


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Reserve Bank slashed interest rates to record 01% as bank governor confirmed Australia has not emerged from recession

The 01% cut is down from the previous record low of 025 percent, which was announced earlier this year, and is not expected to rise for at least three years

Along with the official spot rate cut, the RBA lowered its three-year bond rate target to 01 percent The new historically low rate will also apply to the bank’s term finance facility. p>

The central bank has confirmed that it will buy $ 100 billion worth of Australian government bonds over the next six months to lower inflation and encourage lending and investment – a move known as ‘quantitative easing

Bond purchases will be bought in the secondary market and split, of which 80% will be federal government bonds and 20% government bonds

This is in addition to the more than $ 60 billion the bank has spent since March to buy three-year government bonds

Reserve Bank Governor Philip Lowe said the measures would help reduce the high unemployment rate, which he called an « important national priority »

The combination of RBA bond purchases and falling interest rates are expected to help the country recover economically by reducing financing costs for borrowers, contributing to a lower exchange rate and by supporting asset prices and balance sheets

Dr Lowe said the bank was « determined to do what it can to support job creation »

« Encouragingly, recent economic data has been a little better than expected and the near-term outlook is better than it was three months ago, » he said

« Even so, the recovery should still be bumpy and long and the outlook remains dependent on the virus being contained »

Dr Lowe said the RBA will buy bonds « in the amount needed to meet the three-year yield target »

Even though the economy grew slightly in the September quarter, it will still take years to recover from the damage of the coronavirus pandemic, warns Gareth Hutchens

BIS Oxford Economics chief economist Sarah Hunter said the RBA’s decision to cut the cash rate was as expected

Dr Hunter said the bank, noting that it does not plan to increase the cash rate over the next three years, « would provide households and businesses with some certainty about their lending rates. individual short-term « 

« The easing that has been implemented so far has already had a significant impact on the housing market; house prices now tend to rise nationwide and loan data suggests that this will continue in the short term, « said Dr Hunter

Dr Lowe said despite some media reports Australia was not out of the recession and said the Reserve Bank had more monetary ‘firepower’ to use if necessary

« While a negative rate can cause the Australian dollar to depreciate usefully, it could hurt the supply of credit to the economy and lead some people to save more, rather than spend more, » he said. -he declares

« We have done everything we can on interest rates and are now really focused on quantitative asset purchases »

Dr Lowe said Tuesday’s announcements had not been made earlier in the pandemic because monetary easing was likely to have more momentum today than « when widespread restrictions are in place  »

« In the previous months, the usual transmission mechanisms were not functioning normally and the challenges facing the country were best addressed by other political tools

« However, as restrictions are relaxed and people have more opportunities to spend, we believe that further monetary easing now provides additional support for other policies, including fiscal initiatives and the previous RBA monetary policy package « 

Dr Lowe said Australia can expect positive GDP growth in the September quarter despite restrictions in Victoria

« In the central scenario, GDP growth is expected to be around 6 percent year-on-year through June 2021 and 4 percent in 2022, » he said

Official estimates last month put the unemployment rate at 69 percent, with 937,400 people out of work

But the pandemic and various government support measures mean that number underestimates the unemployment crisis, with more than 15 million people on JobSeeker benefits

Dr Lowe said the country’s unemployment rate is likely to remain high, but peak just below 8%, instead of the previously expected 10%

He said it was expected to drop to 6% by the end of 2022

The period of high unemployment would lead to weak growth in wages and prices over the next few years, said Dr Lowe

Inflation is expected to be 1% in 2021 and 15% in 2022

Dr Lowe has warned that the liquidity rate will not increase « until real inflation is durably within the target range of 2 to 3 percent », which will require wage growth and « significant gains in employment »

Homeowners Adelaide Mark and Verity Riessen are eagerly awaiting how much of the rate cut will be passed on to them by their lender

« The last rate cut applied by the RBA was not passed on to us by our lender, » said M Reissen

Two refinancing batches and three children later, they still have 25 years left on their mortgage, which they are currently paying off with a variable home loan at a 32 percent interest rate

The Riessens prepare to look elsewhere if their lender does not pass the cup

« I will either look to negotiate a lower interest rate or look to another lender, » said M Riessen

« Our current lender is offering an interest rate on new loans at 07% less than what we are currently paying, so if we are a loyal customer I would expect our lender to be able to take care of its current customers in the same way as it takes care of new customers « 

Family incomes have been slashed and their expenses have increased since the COVID-19 pandemic hit

The move to home learning earlier in the year forced the family to spend significantly more money on technology for their three children

« We had to spend a lot more money investing in iPads and things like that, so that our kids didn’t miss out »

Ms Riessen said that even the smaller-than-usual 15 basis point cut by the RBA would help, if passed through to them in full

« Those small amounts of money that could result from a lower interest rate can actually make a huge difference »

Financial professional Ankita Gangaramani is trying to save the thousands of dollars she will need for the application and legal fees needed to become a permanent resident in Australia

But with another drop in the official interest rate, she is likely to receive bad news from her bank about how much interest she can earn on the money in her account

Having successfully repaid the $ 40,000 loan she secured for a master’s degree in business administration, Ms. Gangaramani is now focusing on building up her savings while working in the financial sector

« It will be some time before I can collect the amount I need for permanent residence »

Ms. Gangaramani’s application for permanent residence will cost around $ 6,000 in administrative and legal fees

She has a savings account with one of the Big Four banks, but her interest rate steadily drops with each reduction introduced by the RBA

« It used to be about a percentage, so one percent of my total earnings, but now the percentage has visibly dropped, » she told ABC News

« It really impacted me in terms of the amount of interest I earn on the actual savings I make, so my money doesn’t exactly grow »

She fears that today’s RBA cut may mean her interest rate will be cut even closer to zero

« Every dollar counts and it just won’t be the most ideal scenario for me if developments are for the interest rate to drop even more »

This service may include material from Agence France-Presse (AFP), APTN, Reuters, AAP, CNN and BBC World Service which is copyrighted and may not be reproduced

AEST = Australian Eastern Standard Time, which is 10 hours ahead of GMT (Greenwich Mean Time)

Reserve Bank of Australia, central bank, interest rates

World News – AU – Reserve Bank cuts rates to another historic low, doesn’t don’t expect them to increase for three years


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