Westpac: RBA cash rate to remain unchanged until 2023

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on April 24, 2020
Westpac: RBA cash rate to remain unchanged until 2023

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Australia's cash rate will hold at 0.25% for at least three years, according to economists at Westpac.

After five rate cuts in just under a year, the Reserve Bank of Australia (RBA) said the cash rate has reached its floor, indicating it was not prepared to move into negative interest rates. 

While more cuts are out of the question, Westpac chief economist Bill Evans said a rise is also unlikely. 

"We expect that the overnight cash rate is unlikely to be lifted before December 2023," Mr Evans said.

"However, as discussed above, that does not necessarily mean that the Bank will not adjust the bond yield target over this period." 

With the RBA implementing quantitative easing for the first time ever following the second March rate cut, the central bank has been buying billions of dollars of bonds in the secondary market. 

This indirectly helps fund the Federal Government's $200 billion stimulus package and pushes the cash rate lower, making it cheaper for the Government and everyday Australians to borrow cash. 

The RBA has stated it was implementing quantitative easing with a three year bond yield target, which Mr Evans said reiterates the central bank won't lift the cash rate for some time. 

"The choice of the three year bond target rate as the same as the cash rate target is strategic since it sends a clear message that if the Bank is prepared to purchase three year bonds at the overnight cash rate it is reasonable to expect that it is comfortable with the cash rate holding at 0.25% for the full three years," he said. 

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%
FixedMore details
NO UPFRONT OR ONGOING FEES

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

NO UPFRONT OR ONGOING FEES
FixedMore details
  • Easy, digital application process
  • Market leading app to help you pay off your loan sooner
  • No on-going fees
VariableMore details
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
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
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
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.

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. *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 January 24, 2022. View disclaimer.

Mr Evans stressed that a rise in the cash rate would indicate confidence in the economy from the RBA, something that would only be achieved when progress was made on unemployment. 

"The most important forecast will be the unemployment rate. Unemployment is a key policy goal in its own right and the most important influence on inflation through the impact that spare capacity in the labour market has on wages and therefore inflation," he said. 

"We expect that the unemployment rate will hold around 6% in 2021–2023 – well above the 4.5% full employment rate.

"Accordingly wages growth, which we expect will slow to an annual pace of 1.5% by mid-2021 will fail to return even to the disappointing 2.5% we experienced before the advent of the Covid Crisis." 

Mr Evans' predictions mirrored the RBA's, with Governor Phillip Lowe stating he believed the unemployment rate would hold above 6% for the next couple of years.

Both parties also predicted a sharp contraction in the economy in 2020 of around 10%, but differed in the forecast for 2021 growth.

The RBA forecasts a growth of 6-7%, while Westpac is less optimistic at 4%. 

"Westpac expects that growth in the Australian economy will slow back to potential from the second half of 2021," Mr Evans said.

"Labour markets are slow to heal following economic crises.

"After twelve years the Australian labour market had not returned to the pre GFC unemployment rate of 4%. The deterioration in the underemployment rate was more severe.

"Both factors are likely to be apparent in the post-Covid period." 


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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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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