Insights

The Reserve Bank of Australia has announced they have cut official interest rates to a record low of 1.25%.

The cut of 25 basis points was widely anticipated and expected by the financial markets and economists.

“Today’s decision to lower the cash rate will help make further inroads into the spare capacity in the economy,” said RBA Governor Philip Lowe.

“It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target.”

This has been the first official cash rate cut in almost three years.

Phillip Lowe commented by expressing the Australian economy was poised to “grow by around 2.75 per cent in 2019 and 2020.” He also touched on the “lower than expected” inflation outcomes and the continuing “adjustment in established housing markets” as factors for this decision.

Housing conditions remain soft, although in some markets the rate of price decline has slowed, and auction clearance rates have increased. Growth in housing credit has also stabilised recently.

Many Australian economists are predicting this could be the first of several consecutive 25 basis point cuts. This could kickstart the nations stalling economy.

CoreLogic head of research Tim Lawless is expecting the emphasis for change to now turn to mortgage rates.

Lower mortgage rates partnered with an ease of serviceability for home loans are likely to stimulate an improvement in housing market activity.