Invest
Will interest rates reach zero?
The Reserve Bank of Australia has indicated it will do “unconventional things” to kick-start the Australian economy, which could include cutting rates to zero lower bound.
Will interest rates reach zero?
The Reserve Bank of Australia has indicated it will do “unconventional things” to kick-start the Australian economy, which could include cutting rates to zero lower bound.
In response to questioning from the House of Representatives standing committee on economics, Dr Philip Lowe outlined the economic case for zero rates and the lessons learnt domestically through the actions of other central banks.
The governor said that while it is unlikely to pass on four more rate cuts to bottom out at zero, global uncertainty makes such a move impossible to rule out.
“It's possible that we end up at the zero lower bound. I think it's unlikely, but it is possible,” he offered, before conceding that the bank is “prepared to do unconventional things if the circumstances warranted it.”
Mr Lowe went on to indicate that if the world’s economies do see continued rate cuts, Australia would likely follow in their footsteps.
“If, globally, all central banks go to zero, then we would have to consider that as well,” he said.
However, while Australia entering into negative interest rates is an idea that has been entertained, Mr Lowe outlined that he does not consider it an appropriate action for Australia.
"In Switzerland right now the interest rate is minus three-quarters of a per cent, in the euro area it's minus 40 basis points and in Japan it's minus 10. So, some central banks have gone negative. That's one possibility,” said Mr Lowe.
Despite signs “the economy may have reached a gentle turning point”, Mr Lowe said rates will remain low for the foreseeable future.
Explaining that it’s unlikely that rates would rise again until Australia reaches an unemployment rate of 4.5 per cent, Mr Lowe said the goal for the RBA is to have “wage growth consistent with the inflation target”.
“That's the world in which we'll be raising rates.”
About the author
About the author
Stock market
Super fund investors bid to acquire Sydney Airport
A group of super fund investors has lodged a non-binding takeover bid for Sydney Airport, valuing the company at over $22 billion. ...Read more
Stock market
10 most globally held stocks revealed
Australian investors remain bullish on electric vehicles and technology stocks, according to their long-term held positions, new research has shown. ...Read more
Stock market
How ‘gamer investors’ are pushing a new wave of social responsibility
A new generation of younger retail investors are pushing a new social movement, yielding a distributive impact on the markets, most notably through the GameStop saga, two researchers have revealed. ...Read more
Stock market
ASX tipped for record high despite inflation fears
The market is tipped to shake off fears of rising inflation, with the ASX 200 now tipped to close the year at a new record high, an economist has revealed. ...Read more
Stock market
‘Commission-free propaganda’: Warning issued for retail investors
The phrase “if you’re not paying for it, you’re the product” applies just as much to stock trading apps as it does to social media networks. ...Read more
Stock market
Is the tech sell-off creating opportunities for investors?
A tech sell-off sparked by inflation concerns has seen world markets crash. But is it creating an opportunity for investors to ‘buy the dip’? ...Read more
Stock market
Government opens arms to Wall Street
In its bid to maintain Australia’s global competitiveness, albeit its firmly shut borders, the Australian government has included a measure in its recent budget to allow foreign financial services p...Read more
Stock market
Aussie market falls on US inflation
The Australian sharemarket has fallen on the bell after Wall Street experienced sharp sell-offs overnight due to hotter than expected inflation data. ...Read more
Do lockdowns boost property prices? Are short-sellers levelling the playing field? Did you lodge your tax returns early?
Listen now
Will lockdowns halt the housing boom? Is the metaverse taking over? And the cons of lodging your tax returns early
Listen now
Are you being priced out of the market? Have you got the Tuesday blues? And are you ready for the upcoming super changes?
Listen now
Are property prices set to crash? Should you jump on board the fintok craze? And how to prepare for this tax time
Listen now
Stock market
Super fund investors bid to acquire Sydney Airport
A group of super fund investors has lodged a non-binding takeover bid for Sydney Airport, valuing the company at over $22 billion. ...Read more
Stock market
10 most globally held stocks revealed
Australian investors remain bullish on electric vehicles and technology stocks, according to their long-term held positions, new research has shown. ...Read more
Stock market
How ‘gamer investors’ are pushing a new wave of social responsibility
A new generation of younger retail investors are pushing a new social movement, yielding a distributive impact on the markets, most notably through the GameStop saga, two researchers have revealed. ...Read more
Stock market
ASX tipped for record high despite inflation fears
The market is tipped to shake off fears of rising inflation, with the ASX 200 now tipped to close the year at a new record high, an economist has revealed. ...Read more
Stock market
‘Commission-free propaganda’: Warning issued for retail investors
The phrase “if you’re not paying for it, you’re the product” applies just as much to stock trading apps as it does to social media networks. ...Read more
Stock market
Is the tech sell-off creating opportunities for investors?
A tech sell-off sparked by inflation concerns has seen world markets crash. But is it creating an opportunity for investors to ‘buy the dip’? ...Read more
Stock market
Government opens arms to Wall Street
In its bid to maintain Australia’s global competitiveness, albeit its firmly shut borders, the Australian government has included a measure in its recent budget to allow foreign financial services p...Read more
Stock market
Aussie market falls on US inflation
The Australian sharemarket has fallen on the bell after Wall Street experienced sharp sell-offs overnight due to hotter than expected inflation data. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
