The Reserve Bank of Australia (RBA) has announced today the official cash rate will be cut to a historic low of 0.10%, taking it to near negative interest rates. This is the first time the RBA has changed the cash rate since March this year, when the COVID-19 pandemic broke in Australia.
In an official statement regarding today’s decision, RBA Governor Philip Lowe said:
As part of today’s package, the RBA will also implement quantitative easing measures. This includes purchasing $100 billion of government bonds from banks over the next six months — a historic first.
Today’s RBA board meeting, the last of the year, was easily one of the most anticipated in months after Dr Lowe hinted at a possible cash rate cut at Citi’s 12th Annual Australian and New Zealand Investment Conference. In his speech, he said:
This gave financial experts and the big banks a pretty strong indication that the RBA would lower interest rates despite previously stating 0.25% was as low as they would go.
So, what does this mean for you?
In a nutshell, the record low cash rate is great news for homeowners and borrowers but not-so-great for savers. This is because when the cash rate is low, Aussies can take advantage of lower interest rates and take out home loans, but it also means you’ll earn less interest on your savings bank account.
As Australia grapples with a struggling economy, rising unemployment numbers, low inflation, and an official recession, it’s no surprise the RBA has cut the official cash rate.
But, don’t panic. By lowering the cash rate, the RBA is actually hoping to kickstart the economy by encouraging people to spend more. Simply put, the more people spend, the more businesses make, leading to a boost in economic activity and employment.
As Melbourne comes out of its strict lockdown, this historic low cash rate might be just what the country needs to get its economy back up and running.
And it looks like the cash rate will be low for a long time as Australia deals with the economic repercussions of the COVID-19 pandemic.
Dr Lowe has previously made clear that the RBA will not increase the cash rate target until progress is made towards full employment and that inflation is sustainably within the 2-3% target band.
What have the previous cash rates been?
If you’re wondering what the cash rate has previously been, we’ve put together a table of all the past rates since November 2019:
|Effective Date||Official Cash Rate||Change|
|6th November 2019||0.75%||0.00%|
|4th December 2019||0.75%||0.00%|
|5th February 2020||0.75%||0.00%|
|4th March 2020||0.50%||-0.25%|
|20th March 2020||0.25%||-0.25%|
|8th April 2020||0.25%||0.00%|
|6th May 2020||0.25%||0.00%|
|3rd June 2020||0.25%||0.00%|
|8th July 2020||0.25%||0.00%|
|5th August 2020||0.25%||0.00%|
|2nd September 2020||0.25%||0.00%|
|6th October 2020||0.25%||0.00%|
More from the news room
Discover our latest articles on all things finance & lifestyle.Read More