Is the RBA going to cut the cash rate again today?

author-avatar By on April 07, 2020
Is the RBA going to cut the cash rate again today?

Photo by Anggun Tan on Unsplash

Less than three weeks after its emergency rate cut in March, Australia's central bank meets again today to discuss further cuts.

The Reserve Bank of Australia (RBA) met for a second time in a month for the first time since 1997, cutting the cash rate twice in a month for the first time ever to a new record low of 0.25%. 

It also commenced a first-ever quantitative easing (QE) program, designed to help fund the Government's $200 billion-plus stimulus packages, as well as encourage banks to lend to potential borrowers. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers. 

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
FixedMore details
NO UPFRONT OR ONGOING FEES

Basic Home Loan Fixed (Principal and Interest) (LVR < 70%) 3 Years

NO UPFRONT OR ONGOING FEES

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. Rates correct as of October 20, 2021. View disclaimer.

So will the RBA cut again today? Check out their decision here.

The short answer is: It's unlikely, but given the unprecedented times we're currently experiencing, nothing is impossible. 

In the minutes of its emergency March meeting, the RBA said the cash rate had reached its floor and ruled out negative interest rates in Australia.

"Members also agreed that the cash rate was now at its effective lower bound," it said.

"Members had no appetite for negative interest rates in Australia." 

Furthermore, the central bank said the cash rate would not be increased until progress towards full employment (4.5%) was made and inflation sat between 2-3%. 

Given unemployment is tipped to hit 10%, and the Government's 'hibernation' of the economy for six months, it's likely the cash rate won't be moved for a long time. 

NAB economist Rodrigo Catril said the RBA would hold steady today after a tumultuous previous month.

"After all the fireworks last month we don’t expect any surprises from the RBA today," Mr Catril said.

"The RBA is broadly expected to keep policy – the cash rate, yield curve control and QE – unchanged."

Westpac economists also said the RBA's emergency March minutes meant the cash rate would remain as is today. 

"As such, the focus of RBA meetings will be on how the board assesses its QE measures and whether they may require adjusting," they said. 

"For April we do not anticipate this requiring any adjustments."

Meanwhile, Bloomberg's monthly survey of top economists returned a unanimous 0.25% cash rate hold result. 

The RBA's cash rate decision will be announced at 1430 AEST.

What is the RBA doing if it's not cutting the cash rate? 

You may be surprised to find out that for much of the past two weeks, the Australia's interbank overnight cash rate has actually been below the RBA's official cash rate target of 0.25%, even falling to as low as 0.10%.

As of 6 April, the interbank overnight cash rate was 0.18%.

That's because of the RBA's QE's measures which are designed to have the same effect as a rate cut without actually cutting the cash rate. 

The RBA has so far purchased $29 billion of government and secondary market bonds, purchasing billions more each day. 

The government bond purchase is designed to help fund the three stimulus measures, which have boosted Newstart payments, and subsided wages for those out of work via the 'Jobkeeper' scheme

The secondary market purchase is designed to flood the financial market with more money so lenders are encouraged to lend money, rather than sit on their hands.

These two measures push down Australia's cash rate, as the RBA is easing monetary policy by injecting huge quantities of cash into the economy.

In addition to this, the RBA has set up a $90 billion lending facility to banks for small and medium businesses, in partnership with the government, who contributed $15 billion.

Lenders can borrow from this fund at an extremely low rate and then lend this to businesses, in an effort to keep them afloat through the COVID-19 shutdowns. 


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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