RBA warns against ending stimulus measures early

author-avatar By
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

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • 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%
UNLIMITED REDRAWSSPECIAL 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%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS
NSW/VIC/SA METRO & INNER REGIONAL AREAS

Variable Home Loan (Principal and Interest)

  • $5000 Cashback. T&Cs Apply.
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
NO ONGOING FEESFREE REDRAW FACILITY
  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.
NO ONGOING FEESFREE REDRAW FACILITY

Live-in Variable Loan (Principal and Interest) (LVR < 90%)

  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.

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 be 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. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 26, 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.

Lender

4000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

Online Saver (Amounts < $499999)

    4000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

    High Interest Savings Account (< $250k)

      4001$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

      Online Saver ($1-$100k)

        0500$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

        Reward Saver

          000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

          BU Savings Account

            Rates based on a savings balance of $10,000. Sorted by total interest rates. Refer to providers' websites for bonus rate conditions and for any applicable fees and charges. Rates correct as of June 26, 2022. View disclaimer.


            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.

            Latest Articles

            author-avatar
            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 strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

            Collections:

            Be Savings smart.
            Subscribe for free money newsletters.

            By subscribing you agree
            to the Savings Privacy Policy