RBA August 2020 Decision - Interest Rates Maintained

Once again interest rates in Australia have been maintained at 0.25%. Although Victoria is going through a tough time with the coronavirus, the RBA aren’t cutting rates any further. According to this article by Gareth Hutchens for ABC News:

Last month, Reserve Bank governor Philip Lowe raised the prospect of cutting rates further if necessary, perhaps to 0.1 per cent, but the board held off on taking further action at today's meeting.

Interesting, however, I haven’t seen this reported before and there’s no mention of any of this kind of thinking in Philip Lowe’s official statement last month or this month. He acknowledges the impact that coronavirus is having on the Victorian economy and that the Australian economy is “experiencing the biggest contraction since the 1930s” but points out that “the downturn is not as severe as earlier expected and a recovery is now underway in most of Australia”.

Since action wasn’t taken this month even amongst the startling number of cases in Victoria over the past week, it seems unlikely that rates will be cut any further. But who knows what to expect? Six weeks ago the situation was looking so much better on the coronavirus front.

National Auction Results July 25th 2020

The following auction results around Australia were reported by Domain on the 25th of July.

Sydney 64%

Melbourne 45%

Adelaide 67%

Brisbane 52%

Canberra 89%

Auction results took a hit on in all states except for Brisbane which was steady. Sydney only slipped down 1% compared to the month before. The virus numbers and lockdown in Melbourne must have contributed to its poor result - it is down 15% from a previous 60%. Adelaide is down 5% while Canberra is down 16% but from a very high result of 89% last month.

RBA July 2020 Decision - Interest Rates Maintained

Interest rates in Australia have been maintained at 0.25%. The Reserve Bank stated:

At its meeting today, the Board decided to maintain the current policy settings, including the targets for the cash rate and the yield on 3-year Australian Government bonds of 25 basis points.

They go on to illustrate the difficult time the economy has been going through:

The Australian economy is going through a very difficult period and is experiencing the biggest contraction since the 1930s. Since March, an unprecedented 800,000 people have lost their jobs, with many others retaining their job only because of government and other support programs.

They say their actions are helping:

The substantial, coordinated and unprecedented easing of fiscal and monetary policy in Australia is helping the economy through this difficult period. It is likely that fiscal and monetary support will be required for some time.

And allude that they aren’t increasing rates anytime soon.

The Board is committed to do what it can to support jobs, incomes and businesses and to make sure that Australia is well placed for the recovery. Its actions are keeping funding costs low and supporting the supply of credit to households and businesses. This accommodative approach will be maintained as long as it is required. The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.

There’s no mention about lowering rates and it’s unlikely they’ll do so based on their past signals.

Interest rates aren’t expected to rise anytime soon

Lucy Dean writes for Yahoo Finance in “When will interest rates start to rise again?”:

According to Deloitte Access Economics partner Chris Richardson, mortgage-holders have a while until they need to worry about rising rates. 

“Globally and locally, interest rates will be nailed to the floor for years,” he said in Deloitte Access Economics’ quarterly business outlook report. 

More agreement follows:

AMP Capital chief economist Shane Oliver said rates will stay on hold for “at least” another three years, while ABC Bullion’s Nicholas Frappell said Australians shouldn’t expect an increase until at least 2022. 

The article then has a big section on how “many Australians aren’t taking full advantage” of the low interest rates. It’s only to be expected as most of us have other things on our minds right now. Mortgage repayments are a huge bill though and it’s definitely a good time to take a look around the market.

Steve Mickenbecker, Canstar’s finance expert said:

“If you know your home loan interest rate is too high, now is the time to put the knowledge into action. We’ve never seen a home loan market like we have now where lenders are so keen to undercut their competitors’ rates.”

I couldn’t agree more. Banks are competing hard amongst themselves right now. The easiest way to figure out if you can do better is to get in touch.

National Auction Results June 2020

Auction results generally give us an idea of whether the property market is strong or weak. It’s good to see that the auction clearance rates are doing well now that bans on auctions and inspections have been lifted. There’s definite interest from buyers.

The following auction results around Australia were initially reported by Domain on 27th of June and updated on the 29th.

Sydney 65%

Melbourne 60%

Adelaide 72%

Brisbane 52%

Canberra 89%

As 36 suburbs in 10 postcodes in Melbourne go back into lockdown due to the recent uptick in cases, I’d expect some impact on Melbourne results for July.