Will the RBA change the cash rate in June?

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on June 02, 2020
Will the RBA change the cash rate in June?

Photo by Fadzai Saungweme on Unsplash

After holding the cash rate steady for two consecutive months, the central bank meets today to discuss the possibility of a change in June.

March was a historic month for the Reserve Bank (RBA), cutting the cash rate twice to take it to a record low 0.25%, and implementing a quantitative easing program for the first time ever. 

But since then the central bank has been relatively quiet, supporting the government's stimulus packages through its bond-buying program, believing fiscal policy will better drive economic recovery than monetary policy. 

So will the RBA move today to change the cash rate for the third time this year? 

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

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • 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%
UNLIMITED REDRAWSSPECIAL 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%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • 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
Variable
More details
ZERO APPLICATION FEESFEE FREE OFFSET
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
  • The shorter your loan, the less interest you pay in the long run.
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
  • The shorter your loan, the less interest you pay in the long run.
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO APPLICATION FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO APPLICATION FEES

Yard Home Loan (Principal and Interest) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Owner Occupier Accelerates - Evaporate (LVR 60%-70%) (Principal and Interest)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
UNLIMITED EXTRA REPAYMENTS
UNLIMITED EXTRA REPAYMENTS

Basic Home Loan (Principal and Interest) (LVR < 60%)

    Variable
    More details
    EASY DIGITAL APPLICATION
    EASY DIGITAL APPLICATION

    Neat Variable Home Loan (Principal and Interest) (LVR 70%-80%)

      Variable
      More details
      $0 APPLICATION FEE
      $0 APPLICATION FEE

      Budget Home Loan (Principal and Interest) (LVR < 80%)

        Variable
        More details
        100% FULL OFFSET ACCOUNT
        100% FULL OFFSET ACCOUNT

        Offset Package Home Loan (Principal and Interest) (LVR < 60%)

          Variable
          More details
          LIMITED TIME OFFER
          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services
          LIMITED TIME OFFER

          Smart Booster Home Loan Discounted Variable - 1yr

          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services

          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 be 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 June 28, 2022. View disclaimer.

          In short, any change seems unlikely: RBA Governor Phillip Lowe fronted the Senate Select Committee on COVID-19 last week and said the economy was tracking better than previously predicted. 

          "With the national health outcomes better than earlier feared, it is possible that the economic downturn will not be as severe as earlier thought," Dr Lowe said.

          "Much depends on how quickly confidence can be restored."

          Despite this, a hike in the cash rate seems extraordinarily unlikely given the most recent unemployment figures from the Australian Bureau of Statistics (ABS). 

          Unemployment rose to just 6.2% in March from 5.2%, a shock given most economists forecast a rise to around 8.3%. 

          However, almost 600,000 jobs were lost in the month, the most ever, with JobKeeper disguising the extent of the damage to unemployment. 

          Dr Lowe has repeatedly stated the cash rate would not be raised until progress towards full employment was reached, which he revised from 4.5% to 5% last week, due to the impact of COVID-19. 

          "We know from previous sharp economic downturns there will be scarring in the labour market," he said. 

          "We want to reduce the amount of scarring. I think the estimate of full employment starts rising again to 5%."

          NAB economists said monetary policy was needed to support fiscal policy, but this wouldn't come in the form of a cash rate change, with Westpac and CommBank economists in agreement

          "The cash rate is also unlikely to see further reductions with negative rates ruled out by Governor Lowe and the RBA focus now firmly on end-user rates via the yield curve target, as well as ensuring sufficient liquidity in bond markets and the free flow of credit to households and business," NAB said. 

          But could we see a cash rate cut? 

          Again, it is very unlikely we will see a cash rate cut, as Dr Lowe has repeatedly stated the cash rate is at its floor at 0.25% and the RBA did not have an appetite for negative interest rates. 

          "I think negative interest rates are extraordinarily unlikely," Dr Lowe told the Senate Committee last week.

          "I don't think negative interest rates work. The package we have so far is working. If we had to do more we could buy more government bonds."

          However, due to the RBA's bond-buying program, the actual cash rate is around 0.12%, despite the official rate sitting at 0.25%. 

          And in recent weeks there have been increasingly louder calls to take the cash rate negative.

          Westpac economist Bill Evans said negative rates would help lenders cut their home loan rates and help the economy by enabling businesses and mortgage holders to borrow at extremely low cost.

          "A serious case can be made for the RBA to consider further cuts and entering negative territory for the cash rate if it becomes apparent that the economy is deteriorating even more than is currently expected," Mr Evans said.

          "A small open economy with significant foreign liabilities would certainly see a substantial improvement in the competitiveness of the currency with further rate cuts when other major markets are anchored at their effective lower bounds."


          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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          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.

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