Does Australia need an interest rate cut?

Does Australia need an interest rate cut? Vote YES or NO

Does Australia need an interest rate cut? Vote YES or NOShould monetary policy put “People before Profits” or “Poverty…

Posted by on Monday, 3 June 2019

Should monetary policy put “People before Profits” or “Poverty before Property Prices?”

The Reserve Bank has signalled a probable cut in interest rates next week, but Aussies are deeply divided about the need for lower rates.

Government members of parliament are opposing the possibility of more rate cuts while the treasurer, Josh Frydenberg carefully chooses his words in this debate. Struggling homeowners and small business owners are hoping for lower repayments but savers, especially retirees, fear the lower returns they will get following yet another cut to already low savings rates. Even some property professionals are raising concerns about rate cuts.

“I’d prefer they not cut interest rates,” said millionaire property developer and investor Tim Gurner. The real problem is the policies of the banks and lenders, Mr Gurner told the Australian Financial Review. Record low interest rates just underline how difficult economic conditions are, he said. Government MP Tim Wilson agreed that access to credit is a serious issue and criticised the notion that rate cuts stimulate the economy. Rate cuts “actually reduce disposable income for those who can afford it least,” said Mr Wilson.

Possible rate cuts are making average Australians feel more positive about the future, David Plank, ANZ Bank’s Head of Australian Economics told Mortgage Business.

“The prospect of lower interest rates, and what appears to be a major sentiment shift on the housing market, are likely drivers of the positive outlook,” said Mr Plank.

Josh Williamson, senior economist at Citi Research, is also pointing to possible rate cuts (and changes to mortgage lending rules) to bring a sharp recovery on house prices.

Treasurer Josh Frydenberg said he respects the independence of the RBA but he did talk to reporters in Melbourne:

“I say to the banks – treat your customers first, put people before profits,” said the treasurer last month, “Pass through to them the true benefits that flow from any interest rate changes,”

You can keep up to date with the latest updates on RBA interest rates here.

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