Will the RBA change the cash rate in August?

author-avatar By on August 04, 2020
Will the RBA change the cash rate in August?

Photo by Nathan Hurst on Unsplash

Australia's central bank meets again today to discuss the possibility of a change to the cash rate.

The Reserve Bank (RBA) has held the rate at a record low 0.25% for four consecutive months, after March saw two rate cuts as well as the implementation of a quantitative easing program

Any change to the cash rate for August looks extremely unlikely. 

Check out the decision here.

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
WIN YOUR HOME LOAN INTEREST FREE

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • No Nano fees, Free 100% offset sub account. Mobile app. Visa debit card & instant payments.
WIN YOUR HOME LOAN INTEREST FREE

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • No Nano fees, Free 100% offset sub account. Mobile app. Visa debit card & instant payments.
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

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

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

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

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
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.^
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

Rates correct as of September 28, 2021. View disclaimer.

NAB economist Rodrigo Catril said the central bank was "almost certain" to keep monetary policy and its policy guidance unchanged moving forward.

The RBA's shadow board from the Australian National university meanwhile gave a marginal chance there could be a rate cut. 

"The Shadow Board attaches a 6% probability that a final rate cut, to the lower bound of 0% is appropriate," the Board said.

In a recent speech, RBA Governor Phillip Lowe said a rate cut was possible, but would require a reconfiguration to the current system, taking the rate to 0.10%. 

"Using international experience as a guide, it would have been possible to configure the existing elements of the RBA package differently," Dr Lowe said.

"For example, the various interest rates currently at 25 basis points could have been set lower, at say 10 basis points."

"The board has, however, not ruled out future changes to the configuration of this package if developments in Australia and overseas warrant doing so."

The RBA has repeatedly expressed it would not hike the rate until progress was made towards full employment and inflation sits between its desired band of 2-3%. 

Figures released last week showed Australia is experiencing deflation, with the consumer price index plunging 1.9% in the June quarter, the biggest drop seen since records began 72 years ago. 

The drop takes annual inflation to -0.3%, only the third time annual inflation has been negative in Australia's history.

Unemployment rose to 7.4% in June, up from 7.0% in May, as more people began to look for work and COVID-19 restrictions were eased. 

However, Dr Lowe said he expected unemployment to rise as the scars from the pandemic deepened. 

"As the labour market continues to improve, we expect many of these people will start looking for jobs, and thus be classified as rejoining the labour force," he said. 

"This will push up the measured unemployment rate at the same time that the share of the working-age population with a job is also rising."

Melbourne crisis warps economic outlook 

The RBA and economists have repeatedly said although the road to recovery was uncertain, it would only be achieved by flattening the curve, easing restrictions and returning the economy to normality. 

With Melbourne entering stage 4 restrictions this week and many locations in New South Wales and Queensland now advising the use of face masks, Australia has regressed in its battle against the virus. 

Weekly consumer confidence declined almost 2% last week, the fifth decline in a row and largest weekly decline in a month. 

ANZ Head of Australian Economics David Plank said sentiment had dropped almost 10% from its high at the end of May. 

"The rise in pandemic related deaths in Victoria and new case numbers rising in Sydney seem to be sapping confidence," Mr Plank said.

"The reductions in the Jobkeeper and Jobseeker payments from the end of September may have also weighed, with ‘current economic conditions’ falling sharply and the improvement in ‘current finances’ stalling at a low level."


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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