The economic slowdown in China remains a massive concern for Australia and the main reason why the RBA could decide before the end of the year to drop official rates from their current record low of 2.0 per cent.
The Reserve Bank of Australia is under pressure to again lower official interest rates to offset increases to mortgage rates imposed by the major banks and many other lenders.
Almost 40 per cent of Australian households have been impacted by lenders lifting their rates out of cycle in recent weeks.
The RBA needs to reduce rates by 25 basis points just to offset the increases by the major banks and other lenders who have increased their variable interest rates from 15 to 49 basis points due to additional compliance and provisioning costs.
Rates being raised independently of the central bank’s decisions will not have helped lift the mood of consumers as we approach Christmas. But another rate cut by the RBA will boost confidence ahead of the festive season even if the cut is not passed on immediately or in full.
The economic slowdown in China remains a massive concern for Australia and the main reason why the RBA could decide before the end of the year to drop official rates from their current record low of 2.0 per cent. It’s all about China. And currently China’s economy is in a gradual slowdown. Any further deterioration will mean more bad news for already struggling commodity prices and savage blow to the Australian economy.
The RBA has more capacity than most central banks around the world to lower its cash rate and a reduction will drive the Australian dollar even lower to boost exports, encourage international tourism and stimulate jobs growth.
Although lower interest rates are not good news for some investors, they have helped borrowers and bolstered consumer confidence during challenging economic times.
Cigna Wealth’s advice to home loan customers is to take advantage of the low interest rate regime and pay down mortgages as much as possible.