Brighter Buying

Could an interest rate cut be on the cards next week?

by Kate Watt, Marketing Manager 30 January 2020

At its last meeting in December 2019 the Reserve Bank of Australia said it would “reassess Australia’s economic outlook in February 2020”. So what?

Well, in the language of economists, that’s code for “pencil in a February rate cut peeps”.
And now here we stand now just days away from the first RBA meeting of 2020. Should mortgage holders still be excited at the prospect of an imminent rate cut – one that would cut home loan repayments to further new lows?
Maybe not. Recent economic data looks to have cooled this possibility. This is how it works.
Think of the RBA as the Goldilocks of Australia’s economic growth. It uses interest rate moves – up or down – to keep our growth “just right” – not too slow and not too fast. Throughout 2019 Australia’s growth was sluggish. So the RBA waved its magic wand and cut rates three times to record lows in the hopes it would get Aussies spending, in turn reigniting economic growth.
It works a bit like this: the more you spend, the more growth our businesses enjoy and they can start to hand out things like pay rises (remember them?) or better yet, employ more staff.
Two months of strong employment data suggest the economy is moving in the direction so economists are downplaying the chance of a February cut, the Financial Review reported last week.
So if you were hoping to further reduce your home loan repayments, you might be outta luck. But the good news is, you’re already paying lower interest rates than we’ve seen in living memory, and a strengthening employment market is good for everyone! So even if rates don’t fall further next month, you could think of it as a win-win.
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