It is expected that the interest rates during a & # 39; longer period & # 39; remain at historic lows.
Australia's economic growth rate has been weakest since the global financial crisis ten years ago, while inflation of just 1.3 percent is significantly lower than the Reserve Bank's two to three percent target.
Philip Lowe, the governor of the central bank, hinted that interest rates would probably remain low, after successive cuts in June and July, bringing the cash rate to a low of one percent.
& # 39; Whether further monetary easing is needed, it is reasonable to expect a longer period of low interest rates & # 39 ;, Dr. Lowe on Thursday for a lunch at the Anika Foundation in Sydney.
& # 39; With current projections, it will be some time before inflation returns to comfortably within the target range. & # 39;
Reserve Bank of Australia Governor, Philip Lowe, hinted that interest rates would probably remain low after successive cuts in June and July, bringing the cash rate to a record high of one percent
HAS YOUR BANK SUCCESSFUL?
After the last interest rate cut, ANZ was the only major bank to fully implement the RBA interest rate cut by 25 basis points and to bring its standard variable interest rate to 4.93 percent.
The Commonwealth Bank lowered its standard variable interest rate for principal and interest by 19 basis points to 4.93 percent.
National Australia Bank also lowered its equivalent credit rate by 19 basis points to 4.92 percent.
Westpac has lowered its home interest rate by 20 basis points to 4.98 percent
Economists expect the central bank to lower twice more by mid-2020, which means that the cash rate would only be half a percent.
With two more cuts, Australia would have zero interest rates.
This would place it in an unprecedented situation known as quantitative easing, where the RBA would effectively purchase government bonds to stimulate the money supply.
Dr. Lowe, however, rejected suggestions further interest rate cuts would encourage Australians to incur more debt, although the standard variable mortgage rate is at the lowest level since the 1950s.
& # 39; Many people in the community feel that they have already borrowed too much, and now they are in a period of consolidating the balance sheet instead of incurring more debt, even if there are low interest rates, & Dr. . Lowe during the discussion. slice of lunch.
Unexpected growth of job seekers has brought inflation below the target of 2-3 percent of the RBA
Australia's debt / income ratio of 190 percent is now at a record high and is the second highest in the world after Switzerland.
The average house prices in Sydney and Melbourne are also out of reach for people with an average income.
Although many variable-rate mortgage holders are set to save more than $ 100 a month with the recent interest rate cuts, homeowners who continue to follow existing mortgage payments would save more in the longer term.
Homeowners with an average standard variable mortgage of $ 400,000, who maintained the same repayments, were able to shave $ 40,000 and three years off their loan, comparison website finder said.
& # 39; If borrowers are used to that higher repayment amount, it won't cause extra pain for much profit in the long run, & # 39; said Finder Insights manager Graham Cooke.
& # 39; Nobody expects rates to stay that low forever, so smart homeowners will make hay while the sun shines. & # 39;
There is no end in sight for interest rates to stay at record depths, according to the RBA
& # 39; If you can repay extra now, you reduce the risk of mortgage stress if and when the rates eventually rise again. & # 39;
Dr. Lowe said that a weak economy justified the need for possibly more interest rate cuts.
& # 39; If demand growth is not sufficient, the board is willing to provide additional support by further easing monetary policy & he said.
& # 39; It remains to be seen whether future growth in demand will be sufficient to put pressure on the delivery capacity of the economy and to lift inflation within a reasonable timeframe. & # 39;
The preferred inflation measure of the RBA, the trimmed average that removes dramatic price movements, has been below two percent for four years.
The inflation data for the June quarter is expected to show a continuation of moderate price pressure.
Dr. Lowe rejected calls to shift & # 39; the goal posts & # 39; when it came to focusing on inflation, a policy that has existed since the early 1990s.
& # 39; The Reserve Bank Board is determined to ensure that we get there and continue to deliver an average inflation rate of between two and three percent & # 39 ;, he said.
& # 39; It is reasonable to expect a longer period of low interest rates & # 39 ;, RBA governor Dr. Philip Lowe told Thursday of a business lunch in Sydney.
In September 2008, during the height of the global financial crisis, interest rates had reached 7.25 percent.
Dr. Lowe & # 39; s predecessor as RBA governor Glenn Stevens aggressively lowered the cash rate to 3.25 percent in February 2009.
This week, Westpac chief economist Bill Evans marked two more interest rate cuts in November and February.
& # 39; We expect the path of the unemployment rate to be sufficiently inconsistent with the CBA's plans that they will have an appropriate justification for easing policies a little earlier, & # 39; he said.
& # 39; However, the labor market remains the most direct priority for the RBA, and with updates to the terms and conditions provided monthly, prospects for the next step can be dismissed as early as September or October.
Commonwealth Bank chief economist Michael Blythe predicted a rise in inflation to 1.6 percent thanks to higher food prices and a 10 percent increase in gas prices.
. [TagsToTranslate] Dailymail