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RBA Drops Cash Rate to 0.25%

interest-rate-dropThe Reserve Bank today reduced the official cash rate for second time this month, as part of a response to economic impact of coronavirus.

The RBA lowered the cash rate to an all-time low of 0.25% today.

With an out-of-cycle cut potentially on the cards, Finder conducted an unscheduled survey this week, polling 15 experts and economists about the movement of the cash rate , among other things.

Around half of the economists who responded to the survey (53%, 8/15) expected the RBA to make an emergency cash rate cut this week.

The ABS published unemployment figures this afternoon as 5.1% in February 2020 (seasonally adjusted). This is down from 5.3% in January, but up slightly from a year ago in February 2019 (5.0%).

Graham Cooke, insights manager at Finder, says the rate move was prudent in these unprecedented times.

“After the US cut its rate by 100 basis points and New Zealand cut by 75 this week, it was inevitable that the RBA followed suit,” he says.

“But, after five cuts in the last 12 months, the RBA has far less room for stimulus than those other central banks.

“The RBA has said they do not intend to ever go below 0.25% – so this really is our lowest possible rate.

“Borrowing is about to become even cheaper than its already rock-bottom cost.”

Economist Mark Crosby of Monash University says he expected the month’s second rate change in order to keep Australia in working order.

“Businesses cannot function without a workforce while still paying rent and interest,” he says. “The RBA and the Government need to do what it takes to get these costs closer to zero.”


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