RBA warns against ending stimulus measures early

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on November 24, 2020
RBA warns against ending stimulus measures early

Photo by Joshua Hoehne on Unsplash

Social groups have been loud and clear about the dangers of ending stimulus early, and today Reserve Bank Deputy Governor Guy Debelle said the same.

"There was one lesson from the [global financial] crisis I didn't talk about two years ago that is relevant to today: be careful of removing the stimulus too early," Mr Debelle said at the Australian Business Economists webinar today.

"A number of European countries learned this lesson to their cost after the global financial crisis.

"Absent the fiscal support, the Australian economy would be much weaker with the consequent economic and social damage."

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
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
FixedMore details
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.

Rates correct as of January 24, 2022. View disclaimer.

Mr Debelle's comments come after the Reserve Bank found that unemployment numbers would have doubled without JobKeeper.

Currently, both JobKeeper and the boosted JobSeeker rate are set to end in late March 2021.

Despite the cost of stimulus to the government budget, Mr Debelle said "public debt is very manageable", with public sector debt remaining low as a share of gross domestic product (GDP).

Private debt, however, remains some of the highest in the world, with household debt at 119% of GDP, second in the world only to Switzerland.

The 119% figure was measured in March 2020, and Mr Debelle said in that time household savings have skyrocketed.

"Household incomes have been boosted by the support through the JobSeeker and JobKeeper programs," he said.

"These have all contributed to a very large increase in household savings, further bolstered by the constraints on household spending through the period."

Earlier in the year, Australian Bureau of Statistics (ABS) data revealed household savings ratios were at a 46-year high, and AMP also found household incomes were better off by $5,000, on average, during the pandemic.

Where to for older people?

Mr Debelle said lower mortgage rates have led to a 5% owner-occupier credit growth, but that had not carried over to the investment space.

"Investor lending had been declining, in part reflecting expectations of lower returns given weaker rental demand," he said.

Throughout the pandemic, many states made it illegal for landlords to evict tenants who could not pay rent. 

Mr Debelle also said lower borrowing rates tend to benefit younger people.

"Those who depend on interest income are generally aged over 65," he said.

"Back when the cash rate was at 1.5%, around 5% of these older households were earning more than one-fifth of their income from interest."

Deeming rates have so far not been reduced after the Reserve Bank's cash rate cut to 0.10% earlier in November.

The rates, which the government 'deems' pensioners' assets to be earning, are still at 0.25% on the lower threshold, and 2.25% at the higher threshold. 

The highest savings account rates are generally under 2% per annum, as seen in the table below.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. 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. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about breaking down complex financial topics for the everyday consumer.

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