Win for homeowners as RBA cuts rates again
Households struggling with hefty mortgage payments have scored another win with the Reserve Bank announcing a further cut to official interest rates.
The central bankâs 25 basis point cut in the official cash rate to 3.85 per cent, announced on Tuesday afternoon, had been widely predicted by economists.
The announcement, which came at the end of the bank boardâs two-day meeting, is only the second cut to mortgage interest rates in Australia in almost five years.
Assuming banks pass the latest cut on in full, it will mean the median mortgage-holder with a $600,000 debt will pay about $90 less a month in interest.
It follows Februaryâs landmark first cut and the decision at the RBAâs pre-election meeting in early April for another pause.
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Earlier, Finance Minister Katy Gallagher noted that homeowners would have been keenly awaiting the latest interest rate ruling, adding that a fall in inflation levels was a positive sign.
âWe know inflation has come back into band ⌠and that is a welcome progress that has been made over the last two years,â she told ABC TV on Tuesday.
âWe know that has been hard for households.â
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Inflation for the March quarter remained steady at 2.4 per cent, while underlying inflation, which removes volatile price movements, dropped to 2.9 per cent.
Both measures are within the Reserve Bankâs target band of 2-3 per cent.
Nicola Powell, chief economist at property portal Domain, said Tuesdayâs interest rate cut was pretty much a given.
As well as moderating inflation and sluggish consumer spending, US President Donald Trumpâs tariffs have bolstered the case for a cut to support the Australian economy, amid an anticipated global slowdown.
âObviously, itâs going to be at the forefront of their mind, the impact that that is going to have on the domestic economy,â Powell said.
Gallagher said that prices remained high, despite progress on inflation.
âSome of those really high peaks in inflation really hit household budgets, and people felt it when they went to the supermarket, when they paid their bills,â she said.
âWe get the job isnât done either and that weâve got to continue our focus, not only on inflation but also on productivity on that side of the economy over the next couple of years.â
Given the widespread expectations of a rate cut have now been met, market attention has quickly turned to the Reserve Bankâs statement and governor Michele Bullock for signs of where the board is likely to go next.
How much Bullock pushes back on market pricing of the cash rate, as she did following the February decision, will feed into investor confidence of further cuts.
She is due to address the media later on Tuesday.
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