RBA to cut interest rates by end of 2019

Market Insights
5 years ago
1 minutes

In a speech to reporters at the National Press Club in Sydney, RBA governor Phillip Lowe has changed his stance on the likelihood of an interest rate cut.

Just weeks ago he said the chances of a cut were 50/50. However, he has now changed his outlook in light of recent economic data reports, noting that an interest rate cut could happen by the end of 2019. Some economists, like AMP Capital’s Shane Oliver, are predicting there could even be two cuts, one in August and another in September.

If banks pass on the suggested interest rate cut to their customers, this will mean lower interest repayments on mortgages — which is good news for homeowners.

In addition to this, Lowe said there were a number of factors supporting Australia’s economy. “The Australian economy is benefiting from strong growth in infrastructure investment and an upswing in other areas of investment. The labour market is also strong, with many people finding jobs," he noted.

After 27 consecutive Reserve Bank board meetings, interest rates have been on hold at a record low of 1.5 per cent. So why the cuts? Against a generally positive picture, the RBA is keeping track of the amount Australians are spending, and the property landscape.

Regarding the market, Lower anticipated further declines in property prices. “It was the correction that I think became inevitable,” he said.

“I think it is likely we will see further price declines in Sydney and Melbourne. The prices got to very high levels and so some further adjustment would not surprise me, but I think it is manageable.”

This is great for first-time buyers who have previously been shut out of the market. And with developers introducing more incentives like 5% deposits and $20,000 towards your mortgage, now is the time to buy.

Click here to read first home buyer tips on getting informed.


Source: ABC News and AMP Capital