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All of Australia’s ‘big four’ banks have vowed to pass on the 0.25 percentage point rate cut handed down by the Reserve Bank of Australia, after it announced a reduction in the cash rate from 3.85 to 3.6 per cent.
Commonwealth Bank and Westpac were the first of the big four to announce they would pass the cut on in full to customers, with ANZ and NAB following. Macquarie also announced it would pass on the cut in full.
Treasurer Jim Chalmers said the widely anticipated decision was “welcome relief” for borrowers and would “put more money in the pockets of people who are under pressure”.
Chalmers said Australians could thank themselves for lowering inflation but acknowledged that a cut to the official cash rate “won’t solve every problem we have in our economy”.
It marks the third interest rate cut of the year, following similar reductions in February and May.
My Bui, an economist at financial services firm AMP, told SBS On the Money podcast the announcement is “pretty much no surprise”.
She said the RBA economic outlook, also released today, points to more rate cuts in the coming months.
“The RBA still sees the unemployment rate peaking slightly higher from now as well as inflation sustainably landing in the midpoint of the target, so for me that’s a sign of more rate cuts to come,” she said.
Meanwhile, some economists have criticised the central bank’s decision to wait until August to announce the cut.
Diana Mousina, deputy chief economist at AMP, said: “I think it’s the rate cut we didn’t get in July.”
“I don’t think the Reserve Bank should have waited and caused disappointment, and also caused confusion in the markets.”
Threat of trade war easing
In a press conference announcing the decision, RBA governor Michele Bullock rejected questions about whether the board’s rate-setting was restrictive.
“The board will keep doing what it needs to do to keep inflation down and maintain a healthy jobs market because when inflation is low and stable and people can get jobs, it’s good for households, it’s good for the community and it’s good for the broader Australian economy,” she said.
RBA governor Michele Bullock says global economic uncertainty remains even though the immediate threat of a trade war is easing. Source: AAP / Yuri Gripas
“The global outlook remains unpredictable even though it seems that the risk of a more damaging, widespread trade war has eased a bit.”
“We don’t have a point estimate for where we might end up. You’ll note in the forecasts we have inflation coming back down to target and the unemployment remaining where it is, with a couple more cash rate cuts in there. That’s the best sort of guess. But things can change.”
The board reiterated its commitment to maintaining full employment and price stability, though acknowledged that weak demand from consumers could lead to job losses.
