While the verdict is still out on the next big rate cut, Compare the Market’s Economic Director, David Koch, alongside other economists, tip that it will be a rate cut of at least 0.25%.
The rate cut is set to be announced by the Reserve Bank (RBA) next Tuesday and Koch said the interest rate slash could leave thousands more dollars in the hands of some mortgage holders each year.
Koch said a 0.25% rate cut could make a big difference to people’s home loans.
This follows a February rate cut that lowered the cash rate to 4.10% from 4.35%. Koch said the rate cut was needed to relieve inflation effects.
“For a year and a half now, the Reserve Bank has been saying: ‘we’ve got to fight inflation together, we’ve got to bring inflation down to that 2-3% target band. Tighten your belt, cut your spending, reduce demand, and let’s all bring it down together’,” Koch said.
“Well, we’ve done it, so we need some reward – and we should get it. We deserve it.”
Some experts are even predicting a 0.50% rate cut, which will leave mortgage holders with an extra A$212 each month if their lender passes on the cut.
It is likely that the RBA will also have another two or three potential rate cuts this year and they have a lot to consider when making these decisions.
“They’ve got to think about a tariff war, which seems to change on a daily basis, and the impact it will have on our economy,” he said.
“Because remember, we’re a trading nation. In terms of the size of our economy, exports make a huge impact on your and my lifestyle so that’s really important for them.”
He said that the U.S. entering a recession could have a major impact on rate cuts.
“The last quarter economic figures out of the United States showed a contraction in their economy and all of the daily economic data seems to point that the economic slowdown in America is going to continue for a while,” he said.
“So, the Reserve Bank’s got a lot on their plate at the moment.”
