How long will the cash rate stay at a historic low?

Font Size:

The Reserve Bank of Australia (RBA) has announced it will leave the official cash rate unchanged at 0.25 per cent.

The latest April decision follows a rare out of cycle cash rate reduction in March.

Economist Dr Shane Oliver believes back-to-back cuts is as far as the RBA should go.

“0.25 per cent has long been identified by the RBA as the lower bound,” said Dr Oliver.

“There is little benefit to be gained by going to zero or negative based on the experience of Europe and Japan.”

The cash rate should stay at this historic low as Australia heads for a COVID-19 recession, says the RBA Shadow Board set up by the Australian National University (ANU).

The RBA Shadow Board is a project based at the Centre for Applied Macroeconomic Analysis (CAMA) at the ANU Crawford School of Public Policy. It brings together nine leading experts to examine the economy and make a call on optimal interest rates before monthly RBA Board meetings but does not try to predict RBA behaviour.

The COVID-19 pandemic is certain to push Australia into recession for the first time in 28 years, says the board, which is 94 per cent confident that keeping the cash rate on hold is the right policy to see us through this crisis.

“Many standard economic indicators are not a good guide in a fast-moving crisis,” said Shadow Board member Dr Timo Henckel. 

“For example, while the latest official ABS figures show an unemployment rate in Australia of 5.1 per cent, this may well double within a couple of months due to the COVID-19 crisis.

“It is unclear to what extent the government’s JobSeeker program will help workers remain attached to their employers.”

Volatile global financial markets and stock markets taking massive hits mean that “the outlook for the global economy is entirely dominated by the COVID-19 pandemic”, said Dr Henckel.

“The policy responses to control the epidemic are widely expected to lead to a global recession, although there’s disagreement about how deep and enduring it will be.”

Dr Henckel said efforts by the Australian government and RBA to stem the economic downturn are unprecedented and the swiftness with which they’re being implemented makes it difficult to forecast their likely impact.

“Looking ahead six months, the Shadow Board’s vote in favour of keeping the cash rate steady at 0.25 per cent is still very high – 88 per cent,” he said.

“The probability attached to both a rate cut and rate hike is six per cent.” 

How long do you expect the cash rate to stay this low? How will it affect your retirement income?

If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.

Join YourLifeChoices today
and get this free eBook!

Join
By joining YourLifeChoices you consent that you have read and agree to our Terms & Conditions and Privacy Policy

RELATED LINKS

Rates on hold, but further cuts predicted

Economists say as many as two more cuts are likely, starting in October or November.

How to earn more in the low-rate environment

Create a steady income stream and stay ahead of the curve during low-rate environment.

Boost for pensioners expected in government aid package

A cut to deeming rates is expected this week as part of a federal government economic package to

Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?

Contact:
LinkedIn
Email

5 Comments

Total Comments: 5
  1. 0
    0

    There is no connection between the virus and the RBA decision.The RBA decision was publicised long ago.Apart from fall on their sword by going to zero,seems someone in the RBA woke up and asked “whats the point in all these decreases”.The stockmarket is disappointed so it goes down.After one sleep the stockmarket will forget all about it.The low cash rate will continue to cause much damage to peoples plans as well as their sanity.

  2. 0
    0

    There is no connection between the virus and the RBA decision.The RBA decision was publicised long ago.Apart from fall on their sword by going to zero,seems someone in the RBA woke up and asked “whats the point in all these decreases”.The stockmarket is disappointed so it goes down.After one sleep the stockmarket will forget all about it.The low cash rate will continue to cause much damage to peoples plans as well as their sanity.

  3. 0
    0

    Low rates are further inflating the dangerous real estate bubble, as well as making life difficult for those who have saved for their retirement. It is clearly doing nothing to increase consumer confidence or employment, and will be useless in helping with the coronavirus collapse.

  4. 0
    0

    With all the money printing going on I can’t see interest rates ever going up again. In the near future currencies with lower debt levels will further appreciate whilst currencies of highly indebted countries will sink. Forget overseas travel for a while. In the longer run there will have to be a reset of all this debt. We need to go back to money being issued by government as credit, not by banks as debt to be repaid with interest. As it is there will never be enough money to pay debt and the bankers end up with all the assets. The game is nearly up and this fraud which is designed to transfer wealth from the many who created it to the few who print the money will end.

  5. 0
    0

    My sisters live in Europe and they have interest rates in the negative for a few years now. It only really affects people with more than $100’000 in the account. Under that you just get zero return, over it you look at about -0.75%. You pay the bank to keep your money, possibly cheaper than renting a bank vault box.


FACEBOOK COMMENTS



SPONSORED LINKS

continue reading

Travel News

Travel refund problems a 'dreadful, dreadful situation': ACCC boss

Travel-related consumer complaints have risen by 500 per cent since January 2020, with thousands of Australians unable to get refunds...

Aged Care

Whistle-blower family welcomes aged care recommendations

When Barb Spriggs found her husband lying on the ground of the Oakden aged care facility with two nurses standing...

Medication

How do different painkillers work?

It's easy to assume the only difference between painkillers is their strength. Or that any painkiller you can buy without...

Food and Recipes

Cinnamon and Honey Breakfast Jars

"If you have to be up early and you need something speedy, this is the perfect go-to breakfast," says Bake...

Aged Care

It starts with the fundamentals: adequate staffing, adequate food

There have been 22 public reports and inquiries related to publicly funded aged care in Australia since 1997. Will this...

COVID-19

Government reveals details of unit established to bust vaccine myths

With 300,000 doses of the AstraZeneca COVID-19 vaccine arriving in Australia on Sunday, the rollout is starting to speed up,...

Finance

Making it easy to buy Australian

Research shows that since the pandemic an overwhelming number of Australians want to buy locally produced products to support the...

Finance

What your car costs - the surprising costs of driving a ute or SUV

Recent research by Finder shows Australians could be paying thousands of dollars more than necessary to keep their car running....

LOADING MORE ARTICLE...