Hands up who was thankful the Reserve Bank of Australia (RBA) maintained its cash rate of 0.25 per cent? For those in Victoria, and especially Melbourne, the August meeting decision would have been a much-needed relief, as a return to a stage 4 COVID-19 lockdown had the state grinding to a halt on August 6. The cash rate has now sat at 0.25 per cent since March.
However, the RBA’s reason for keeping the cash rate unchanged was enough to depress – although perhaps not completely surprise – the most cheerful person, with governor Philip Lowe stating that, thanks to COVID-19, Australian economy was experiencing the biggest contraction since the 1930s.
He said while the downturn was not as severe as earlier expected and a recovery was now underway in most of Australia, it would be uneven and bumpy, particularly for the Victorian economy.
In a baseline scenario, Mr Lowe revealed unemployment rates could rise to around 10 per cent later this year, due to job losses. But this rate was expected to gradually decline in the next few years to around 7 per cent. In the meantime, the 0.25 per cent cash rate would remain until more progress was made towards the RBA’s goals of full employment and inflation.
Dismal as these statements are, as real estate agents, we don’t believe everything is lost for our industry or you. For starters, the good news for homeowners and investors in all of this is that the fantastically low cash rates will continue to ease your financial burden. We all know banks and lenders don’t always pass on RBA cash rate decisions to help with your home loan. But deferred mortgage payments may help those of you who’ve lost jobs or are really struggling to find cash, at least for a while. As well, the timeline for the fulfillment of the above RBA goals is expected to be two to three years at least, which – while admittedly tough overall – effectively means the cash rate will continue to remain low.
We, as real estate agents, are continuing to watch the market closely, especially as the spring selling season approaches. No one ever knows what the future holds but even if we’re working from our own homes now, we’re as keen as you to see Australia – and your house – succeed in the COVID-19 battle.