The RBA cuts interest rates to new record low

The Reserve Bank of Australia (RBA) has cut the cash rate for the first time since October 2019, lowering it by another 25 basis points to a new record low of 0.50 percent.

In a statement earlier today, Philip Lowe, Governor: Monetary Policy Decision at the RBA said:

“At its meeting today, the Board decided to lower the cash rate by 25 basis points to 0.50 per cent. The Board took this decision to support the economy as it responds to the global coronavirus outbreak.” 

“The coronavirus has clouded the near-term outlook for the global economy and means that global growth in the first half of 2020 will be lower than earlier expected. Prior to the outbreak, there were signs that the slowdown in the global economy that started in 2018 was coming to an end. It is too early to tell how persistent the effects of the coronavirus will be and at what point the global economy will return to an improving path. Policy measures have been announced in several countries, including China, which will help support growth. Inflation remains low almost everywhere and unemployment rates are at multi-decade lows in many countries.”

“...there are further signs of a pick-up in established housing markets, with prices rising in most markets, in some cases quite strongly. Mortgage loan commitments have also picked up, although demand for credit by investors remains subdued. Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality. Credit conditions for small and medium-sized businesses remain tight.”

“The global outbreak of the coronavirus is expected to delay progress in Australia towards full employment and the inflation target. The Board therefore judged that it was appropriate to ease monetary policy further to provide additional support to employment and economic activity. It will continue to monitor developments closely and to assess the implications of the coronavirus for the economy. The Board is prepared to ease monetary policy further to support the Australian economy.”

Prime Minister Scott Morrison has also made a statement regarding the cut, urging banks to "do the right thing by Australians" and pass the cut on in full.

Westpac has been quick to announce their decision to pass on the full interest rate cut, but Vadim Taube, chief executive of InfoChoice warns, “not all banks and lenders will pass on this rate cut in full.” 

Other banks' pricing committees have met today, and are considering their position.

Customers are eagerly anticipating any updates – with the The Financial Review reporting that Westpac's move will save its average mortgage customer around $55 a month, or $662 a year.

For more market insights, click here.