RBA drops cash rate to new record low

The RBA has left the industry flummoxed after announcing a cut to the official cash rate, bringing the interest rate to a new record low of 1.25 per cent. 

The last time the cash rate moved was in August 2016, when it ticked down to its record low of 1.5 per cent.

The RBA last introduced an increase nearly seven years ago (November 2010), when the rate climbed to 4.75 per cent.

The decision has come as a surprise to many. None of the surveyed experts on the finder.com.au panel predicted a rate change, despite some economic indicators showing signs of a slowdown.

Further, chief economist at ABC Bullion Jordan Eliseo predicted that these slowdowns would not be enough to influence the RBA to impose a rate cut.

Mr Eliseo said: “Despite concerns about a slowdown in retail sales growth over the last few months, the RBA still appears confident in the outlook for the Australian economy, though [its] rhetoric around tightening policy has changed appropriately.”

An analysis by RateCity noted that 21 out of 23 major economic indicators suggested that a change was not on the cards.

A HashChing survey of 531 brokers also reported that 95.73 per cent of the surveyed representatives were confident that rates would not change in either direction.

However, while a vast majority of pundits were not expecting the RBA to cut rates, some forecasters, like Mr Eliseo, predicted a rate reduction in the near future as a result of downturns in some economic indicators.

Despite the downturns, the chief economist said that he did not expect the cut to happen until next year.

“We still see the next move as down, but it will not come until Q1 2018 at the earliest,” Mr Eliseo said.

Other industry experts predicted a possible rate rise in the near future.

Mortgage Choice’s head of corporate affairs, Jessica Darnbrough, touted the possibility of an upcoming rate rise, citing improved economic conditions as a motivation for a potential hike. 

“The domestic and international economies are starting to show signs of improvement, which could encourage the Reserve Bank to lift the cash rate at some point over the coming months,” Ms Darnbrough said.

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.