RBA cut not enough
“Seeing that the May interest rate cut of 0.5% has not had the impact that was hoped for by the RBA and industry alike, the June RBA cut of only 0.25% is in my view not sufficient to generate the desired impact,” said property finance expert Robert Projeski, the founder and managing director of Australian Mortgage Options.
While the global finance climate and the Australian share market drop suggested an even bigger cut, Projeski believes that the RBA may have resisted it in favour of having more room to move in July should market activity and economic climates not improve by then.
“It is a kind of ‘chicken or the egg’ scenario: cut the rate now by 0.5% to stimulate consumer confidence and market activity to stabilise the economy or wait and see. If it does not improve, then cut it by 0.5% later,” said Projeski.
Since 1990, when the cash rate was just 3% and the average standard variable mortgage had a rate of 5.8%, Australia has only seen such low rates in 2009, just post-GFC. Projeski believes there is plenty of room to move in terms of interest yet and that the economy is fairly stable overall, with low unemployment, a sturdy mineral sector and strong neighbouring economies such as China.
“I think that a little slowing in retail spending does not necessarily spell gloom. However, a 0.5% RBA cut now would have had more of the result that the RBA is looking for. I see it as possible that we could be seeing an interest rate as low as 2.75% by the end of the year,” he said.
Robert Projeski is a respected property finance expert and the managing Director of Australian Mortgage Options, an independent mortgage management firm with over 9 industry awards to its name. www.amo.com.au
For further comment, an interview or regular contribution/column from Robert Projeski, please contact Erik Bigalk on 0421 441 366 or [email protected]
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