Win for homeowners as RBA cuts rates again
Households struggling with hefty mortgage payments have scored another win with the Reserve Bank announcing a further cut to official interest rates.
The central bank’s 25 basis point cut in the official cash rate to 3.85 per cent, announced on Tuesday afternoon, had been widely predicted by economists.
The announcement, which came at the end of the bank board’s two-day meeting, is only the second cut to mortgage interest rates in Australia in almost five years.
Assuming banks pass the latest cut on in full, it will mean the median mortgage-holder with a $600,000 debt will pay about $90 less a month in interest.
It follows February’s landmark first cut and the decision at the RBA’s pre-election meeting in early April for another pause.
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Earlier, Finance Minister Katy Gallagher noted that homeowners would have been keenly awaiting the latest interest rate ruling, adding that a fall in inflation levels was a positive sign.
“We know inflation has come back into band … and that is a welcome progress that has been made over the last two years,” she told ABC TV on Tuesday.
“We know that has been hard for households.”
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Inflation for the March quarter remained steady at 2.4 per cent, while underlying inflation, which removes volatile price movements, dropped to 2.9 per cent.
Both measures are within the Reserve Bank’s target band of 2-3 per cent.
Nicola Powell, chief economist at property portal Domain, said Tuesday’s interest rate cut was pretty much a given.
As well as moderating inflation and sluggish consumer spending, US President Donald Trump’s tariffs have bolstered the case for a cut to support the Australian economy, amid an anticipated global slowdown.
“Obviously, it’s going to be at the forefront of their mind, the impact that that is going to have on the domestic economy,” Powell said.
Gallagher said that prices remained high, despite progress on inflation.
“Some of those really high peaks in inflation really hit household budgets, and people felt it when they went to the supermarket, when they paid their bills,” she said.
“We get the job isn’t done either and that we’ve got to continue our focus, not only on inflation but also on productivity on that side of the economy over the next couple of years.”
Given the widespread expectations of a rate cut have now been met, market attention has quickly turned to the Reserve Bank’s statement and governor Michele Bullock for signs of where the board is likely to go next.
How much Bullock pushes back on market pricing of the cash rate, as she did following the February decision, will feed into investor confidence of further cuts.
She is due to address the media later on Tuesday.
