Aussies urged to spend rate cuts to help economy
Shoppers are being urged to spend up the latest Reserve Bank of Australia rate cut and help stimulate the nation’s troubled economy, which has taken a hit from the coronavirus crisis.
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Shoppers are being urged to spend up the latest Reserve Bank of Australia rate cut and help stimulate the nation’s troubled economy.
The ongoing coronavirus outbreak has continued to sweep the world and is impacting the nation’s economy which forced the hand of governor Dr Philip Lowe to cut the cash rate to a historical low of 0.5 per cent
Borrowers will save about $45 a month or $540 a year on their mortgage repayments after the central bank slashed the cash rate to a record low.
Dr Lowe said coronavirus was having a significant impact on the education and travel sectors and was also hurting domestic spending.
Figures from financial comparison website RateCity showed a borrower with $300,000 30-year home loan would save about $45 in monthly repayments or $540 per year.
All of the nation’s big four banks – the ANZ, Commonwealth Bank, National Australia Bank and Westpac – announced they were passing on the full 0.25 percentage rate cut onto their variable rate deals.
The last time the big four banks all passed on a cash rate cut in full was February 2015.
But mortgage customers have to be patient to receive the cuts with CBA taking the longest time to pass on the drop and would not be passing it on until March 24 – three weeks after the RBA decision.
Experts including AMP chief economist Dr Shane Oliver said it might not be the last of the rate cuts yet and tipped another drop next month.
HSBC chief economist Paul Bloxham said the latest cut would help give the economy a much-needed rev up.
“It’s going to support help support household income, support growth and the housing market,” he said.
“The big question is whether it’s enough support and whether the RBA need to do more and we are of the view the RBA will have to do more.”
Mr Bloxham said the RBA would have to start considering unconventional policy moves including quantitative easing – effectively flooding the financial system with freshly-minted money.
The Australian Retailers Association’s executive director Russell Zimmerman urged shoppers to open their wallets and spend the savings they would receive from lower mortgage repayments.
“We need people to go out and spend the savings from the interest rate cut,” he said.
“By spending that money it’s an opportunity to assist the economy and the retail industry which employs just on 1.3 million people.
“This will mean we will be less likely to see any more disasters we have seen involving major retailers who have gone out of business.”
Mr Zimmerman encouraged shoppers to his bricks and mortar stores or online Australian websites and spend their extra cash.
“Spend money with Australian retailers to support a great Australian industry,” he said.
Many retailers have hit the wall in recent months including Jeanswest, EB Games, Bardot, Harris Scarfe, Napolean Perdis, Curious Planet and Colette.
But the cut would be likely to hurt savers with falling interest rates on their bank deposits, particularly retirees who rely on this income.
Treasurer Josh Frydenberg said the RBA decision was a move that would “help support the Australian economy in the face of the spread of the coronavirus”.
“We welcome the announcement by the major banks to pass on the 0.25 basis point rate cut in full responding to the Prime Minister’s call,” he said.
“The country is coming together in the face of the significant economic shocks that we face.”
Home loan customer Kate Crowley, 34, from Ramsgate in Sydney’s south has two mortgages – one on her own two-bedroom apartment and another on an investment property in Darlinghurst in the inner-city.
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She said she would be enjoying the cuts to help give her some extra spending money.
“It will affect my monthly repayments but I would prefer my electricity bill to be cut than just my mortgage repayments falling,” Ms Crowley said.
Mortgage Choice chief executive officer Susan Mitchell said borrowers should be checking up exactly what rate they are paying on their loans.
“Once every two or three years you should call up your bank and see if you can get a better deal or go and talk to your broker,” she said.
Aussie chief executive officer James Symond urged borrowers to hunt out home loan rates with a “2” in front.
“Some lenders are offering home loan deals for less than 3 per cent, so it is definitely worthwhile for first home buyers meeting a broker to see whether they are eligible,” he said.