The Reserve Bank is expected to keep official rate steady at 2 per cent today, despite indications from the board that the next move will be down.
A RateCity.com.au analysis of the key economic indicators shows that an unexpected rise in unemployment and sluggish inflation won’t be enough to spur the Reserve Bank into action this month.
Australia’s unemployment rate, which is now at 6 per cent, is a red flag in our economic outlook but the RBA is likely to look for a longer-term trend instead of reacting to the first spike.
Sally Tindall, money editor at RateCity.com.au, said that while these indicators pointed to a rate cut, the RBA board was expected to bank it for another day.
“Recent rises in commodity prices have gone some way to settling market jitters. These gains will help offset other more troubling indicators this month such as slow wages growth and below target inflation figures,” she said.
“Speculation around changes to negative gearing is also weighing on investors’ minds as both sides of politics look set to make it an election issue.
“It’s unlikely we’ll see any solid changes in the housing market until the government’s policies are clearer, but the dramatic decline in investor lending on the back of differential pricing suggests that this sector is susceptible to change,” Tindall said.
While rates are expected to remain on hold, there is still fierce competition at the lowest end of the mortgage market, with rates as low as 4 per cent.
“If you are struggling to meet your mortgage repayments each month, it might be worth taking matters into your own hands, rather than waiting on the RBA to cut rates.
“A person with a $300,000 mortgage can save over $3,000 a month in repayments just by switching from the average standard variable rate from the major banks to one of the most competitive rates on the market.
“Also bear in mind that lenders are looking for borrowers who have a decent amount of equity in their home, which means conditions are ripe for refinancers.
“A lot of Australians look at refinancing at around 7 – 10 years into their home loan, so if that’s you, it might be worth taking a look at what the competition is offering and crunching the numbers to see if you’ll be better off,” Tindall said.