Will the RBA change the cash rate in September?

author-avatar By on September 01, 2020
Will the RBA change the cash rate in September?

Photo by Mitchell Luo on Unsplash

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

Any change to policy looks extremely unlikely, with the Reserve Bank (RBA) set to hold the rate at its record low of 0.25% for the sixth consecutive month. 

Check the decision here.

Looking to compare low-rate, variable home loans? Below are a handful of low-rate loans in the market.

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%
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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
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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.
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  • 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 25, 2021. View disclaimer.

NAB economist Kaixin Owyong said the RBA was universally expected to keep monetary policy unchanged and call on the government to provide support to the economy. 

"In recent communications, the RBA has emphasised that it judged its package of monetary stimulus as appropriate, where cheaper borrowing rates would help support the recovery," Ms Owyong said.

"That said, the RBA stressed it remains willing to do more 'if circumstances warrant'.

"The RBA has also highlighted the important and continuing role for fiscal policy, which is best able to support the economy through the pandemic-driven collapse in demand.

"We expect the RBA to echo similar thoughts in its September post-meeting statement."

It's been five months since the RBA last changed rates, cutting the cash rate twice in March and implementing a quantitative easing program, both historic firsts. 

Recent comments from RBA Governor Phillip Lowe have suggested the central bank could take rates lower, without taking them negative which has repeatedly been ruled out. 

Dr Lowe said it could be possible to take the rate to 10 basis points by reconfiguring the current package if conditions warranted so. 

Although the official cash rate is 0.25%, the RBA's quantitative easing program has pushed down the actual rate to hover around 0.13%. 

A hike in the cash rate seems extraordinarily unlikely, as the RBA has often reaffirmed the rate wouldn't be raised unless progress towards full employment was made and inflation sits between its desired band of 2-3%. 

The most recent figures from the Australian Bureau of Statistics show Australia is experiencing deflation for only the third time in its history. 

The consumer price index plunged 1.9% in the June quarter, the biggest drop since records began 72 years ago, taking annual inflation to -0.3%. 

While unemployment increased only marginally from 7.4% to 7.5% in July, the Treasury last week forecasted the effective unemployment rate would increase to more than 13% in the September quarter.

The RBA has forecasted unemployment will remain above 7% until at least the end of 2021. 

RBA to hold fire ahead of GDP figures 

The central bank may have further reason to hold the cash rate compared to previous months ahead of the June quarter national accounts, which are likely to confirm the full fallout from COVID-19. 

NAB economists are expecting GDP to decline by 5.8%, while JPMorgan senior economist Tom Kennedy is expecting a 7.2% decline, with most other forecasts in between this band. 

The figures are expected to show the greatest quarterly fall in Australia's history, with the previous record for negative growth of 2.0% set in the June quarter of 1974. 

Mr Kennedy's forecast of a 7.2% contraction would equate to $34 billion, taking quarterly GDP back to June 2016 levels. 


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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