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%
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
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
FixedMore details
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

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

  • 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

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

  • 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.

Rates correct as of January 21, 2022. 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. 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
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.

Collections:

Be Savings smart.
Subscribe for free money newsletters.

By subscribing you agree to the Savings Privacy Policy