Will the RBA change the cash rate in July?

author-avatar By on July 07, 2020
Will the RBA change the cash rate in July?

Photo by Harry Cunningham on Unsplash

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

The Reserve Bank of Australia (RBA) has held the cash rate at 0.25% for three consecutive months before today, after cutting the rate twice in March and implementing a quantitative easing (QE) program

Any change to the cash rate for July is looking incredibly 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
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
REFINANCE IN MINUTES, NOT WEEKS

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

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

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

  • Refinance only. Fast online application
  • 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.^

Rates correct as of October 19, 2021. View disclaimer.

NAB economist Ray Attrill said recent remarks from the RBA and current economic and health conditions meant a cash rate hold was all but confirmed. 

"The RBA this afternoon can confidently (be) expected to be on hold as it continues to assess the outlook, where even in its best-case upside scenario, full economic recovery will take years," Mr Attrill said.

"Further, Governor Lowe has emphasised that the economic recovery depends on health outcomes and how quickly confidence is restored, where the recent COVID-19 outbreaks in Victoria have presented an additional downside risk." 

The RBA has been defiant that the cash rate is at its effective floor and repeatedly stated it does not have the appetite for negative interest rates in Australia.

Instead, as a result of the central bank's QE measures, the cash rate has been pushed lower and has hovered around the 13-14 basis point mark. 

At an address to The Economic Society Australia last week, RBA Deputy Governor Guy Debelle said it was unlikely the cash rate would be increased before the end of 2021. 

"The market expectation is that the cash rate will remain around its current level of 13–14 basis points for at least the next year," Mr Debelle said.

"This is consistent with the Board's guidance that the cash rate target will not be raised until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3% target band.

"Given the outlook for inflation and the labour market, this is likely to be some years away." 

July 23 looms large 

Although no surprises are expected from the RBA today, their announcement may provide valuable insight into the fiscal cliff Australia is facing at the end of September. 

Treasurer Josh Frydenberg will hand down a mini-budget on July 23, outlining the fate of the boosted JobSeeker payments and the JobKeeper scheme. 

RBA Governor Phillip Lowe has emphasised his concern that economic recovery will be stymied if the support measures are withdrawn too early. 

"I think it's very important that we don't withdraw the fiscal stimulus too early," Dr Lowe said at the end of May.

"Ending the fiscal support could be damaging, but if the economy bounces back then tailoring the fiscal support might be the right thing to do."

Around 3.3 million workers are currently supported by JobKeeper's $1,500 a fortnight payment, and a hard end to the scheme could see a huge spike in unemployment. 

The unemployment rate currently sits at 7.1%, with more than 800,000 people losing their jobs since the start of COVID-19. 

Unwilling to consider negative interest rates, the RBA is essentially all out of tools to manipulate monetary policy, and is now looking to the Government to provide support to the economy through fiscal measures. 


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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