Invest
Last rate day of the year revealed
The Reserve Bank of Australia has announced its decision on the official interest rate for December, following predictions of a hold.
Last rate day of the year revealed
The Reserve Bank of Australia has announced its decision on the official interest rate for December, following predictions of a hold.
Having cut rates to a record-low 0.10 per cent in November, the RBA has acted as many economists predicted holding the cash rate for December.
Prior to the announcement, Wealth Within chief analyst Dale Gillham believed the Australian economy was in a stronger position than many expected, despite the first recession in nearly three decades.
“Things are not as bad as they could be, and so the recession is likely to be short-lived and so interest rates are unlikely to fall further,” he said.
“The release of figures around retail spending and GDP in this second quarter will be an indication as to whether rates will rise in 2021 or remain at current levels. If retail spending is strong, then a movement in rates will occur earlier rather than later.”
Harley Dale, chief economist at CreditorWatch, agreed with Mr Gillham, believing the RBA has reacted as many expected.
“The RBA fired its last interest rate bullet in November, taking the official cash rate (OCR) to a barely positive rate of 0.1 per cent,” Mr Dale explained.
“The RBA is pleased with the substantial stimulus that the federal and state governments have provided. The combination of super low interest rates and hefty fiscal policy has created the defensive line Australia required in 2020 to avoid the chronic impact that COVID-19 is having in Europe and the United States.”
What’s happening next?
Economists are predicting that the RBA will hold the record-low interest rate for longer, with the central bank unlikely to reach it’s inflation targets over the short term.
“Given that the cash rate is already at 0.1 per cent and the RBA does not want to take it negative, the next move is likely to be a hike.”
“But given the high level of spare capacity in the economy, inflation is unlikely to meet the RBA’s conditions for a hike of being sustainably within the 2-3 per cent target range for another three years or so. As a result, the first rate hike is unlikely until sometime in 2024,” AMP chief economist Dr Shane Oliver concluded.
RELATED ARTICLES
About the author
About the author
Cash
Navigating the equilibrium: Investor sentiment in the face of equity peaks and diminishing cash reserves
State Street's latest Risk Appetite Index indicates a nuanced shift in institutional investor sentiment during March, with the index reverting slightly towards neutrality. This subtle recalibration in ...Read more
Cash
RBA's November rate hike overshadows Melbourne Cup festivities
In a move that managed to draw attention away from the thrill of the Melbourne Cup, the Reserve Bank of Australia (RBA) has increased the cash rate by 25 basis points to 4.35 per cent, surprising ...Read more
Cash
RBA makes first cash rate call for 2022
The RBA has announced its first rate decision for 2022. Read more
Cash
Cash remains king for many Australians
Demand for banknotes remains high despite a decline in cash transactions. Read more
Cash
Interest rates to rise next year?
Commonwealth Bank has seconded Westpac’s predictions, forecasting that interest rates will rise well ahead of the RBA’s 2024 timeline. Read more
Cash
RBA makes latest official cash rate call
The Reserve Bank of Australia has made its May call on the official cash rate, with the economy said to be a long way from the conditions needed to precede a rate rise. Read more
Cash
RBA puts chatter of an earlier rate hike to rest
The Reserve Bank of Australia has put to rest chatter among investors that conditions for a higher cash rate could be met as early as next year, reaffirming its stance that the rate is “very likely” ...Read more
Cash
Australia tipped to go cashless by 2024
Australia is forecast to effectively go cashless in just three years, with three in 10 Aussies admitting that “going cashless would be great for the country”. Read more
Cash
Navigating the equilibrium: Investor sentiment in the face of equity peaks and diminishing cash reserves
State Street's latest Risk Appetite Index indicates a nuanced shift in institutional investor sentiment during March, with the index reverting slightly towards neutrality. This subtle recalibration in ...Read more
Cash
RBA's November rate hike overshadows Melbourne Cup festivities
In a move that managed to draw attention away from the thrill of the Melbourne Cup, the Reserve Bank of Australia (RBA) has increased the cash rate by 25 basis points to 4.35 per cent, surprising ...Read more
Cash
RBA makes first cash rate call for 2022
The RBA has announced its first rate decision for 2022. Read more
Cash
Cash remains king for many Australians
Demand for banknotes remains high despite a decline in cash transactions. Read more
Cash
Interest rates to rise next year?
Commonwealth Bank has seconded Westpac’s predictions, forecasting that interest rates will rise well ahead of the RBA’s 2024 timeline. Read more
Cash
RBA makes latest official cash rate call
The Reserve Bank of Australia has made its May call on the official cash rate, with the economy said to be a long way from the conditions needed to precede a rate rise. Read more
Cash
RBA puts chatter of an earlier rate hike to rest
The Reserve Bank of Australia has put to rest chatter among investors that conditions for a higher cash rate could be met as early as next year, reaffirming its stance that the rate is “very likely” ...Read more
Cash
Australia tipped to go cashless by 2024
Australia is forecast to effectively go cashless in just three years, with three in 10 Aussies admitting that “going cashless would be great for the country”. Read more
