The Reserve Bank of Australia (RBA) has today announced that interest rates will remain at the historic low of 0.1 per cent for the remainder of 2020. The central bank cut rates last month, and have now said they will likely keep the cash rate unchanged for up to three years.
RBA Governor Philip Lowe spoke on behalf of the bank, saying they are doing their best to stimulate the Australian economy out of the COVID-19 recession.
“In Australia, the economic recovery is under way and recent data have generally been better than expected. This is good news, but the recovery is still expected to be uneven and drawn out and it remains dependent on significant policy support,” Mr Lowe said.
“In the RBA’s central scenario, it will not be until the end of 2021 that the level of GDP reaches the level attained at the end of 2019.”In the central scenario, GDP is expected to grow by around 5 per cent next year and 4 per cent over 2022.”
Harley Dale, Chief Economist at CreditorWatch, has said while the decision to keep the rates steady was largely anticipated, it is a move that will help Australia to avoid an economic disaster.
“In a universally expected decision, the Board of the Reserve Bank of Australia (RBA) left interest rates on hold today. The RBA fired its last interest rate bullet in November, taking the Official Cash Rate (OCR) to a barely positive rate of 0.1 per cent.
“The RBA is pleased with the substantial stimulus that the federal and state governments have provided. The combination of super low interest rates and hefty fiscal policy has created the defensive line Australia required in 2020 to avoid the chronic impact that COVID-19 is having in Europe and the United States. “
The low interest rates have spurred a record-level of homebuyers to purchase, with NAB predicting a steep increase in first home buyers.
“In November, demand for NAB home loans was stronger than we’ve seen for more than two years,” NAB’s Executive of Home Ownership Andy Kerr told 9news.com.au.
“Applications over the past six weeks are up more than 25 per cent against the prior six weeks.
“Demand has been supported by record low rates, growing confidence in the economic recovery and strong government support measures.”
“We’re currently forecasting property price growth of upwards of 5 per cent in each of the next two years, with apartment prices likely to lag house price growth.”
Mr Dale said looking forward that the RBA will be keeping an eye on Christmas sales within the retail sector, before they meet for the next time in January.
“The RBA does not meet in January, but will no doubt keenly watch the performance of the retail sector over Christmas and the holiday season. It is widely expected that this sector, battered by the adverse consequences of COVID, will enjoy better returns in December/January than was considered likely even only a few months ago.
“CreditorWatch data has revealed the struggles the retail sector has experienced, but in coming months this data will provide a leading indication of whether the retail sector is indeed on a sustained path back to healthier trading conditions.”