The RBA lowers interest rates – but by how much?

The Reserve Bank of Australia (RBA) has taken emergency action in response to growing global and domestic economic concerns, now initiating a decline in interest rates from 0.25%.

This lowers the spot rate to an all-time low of just 0.25%.

The decision comes as the pandemic threat COVID-19 continues to cause chaos and uncertainty around the world.

Sarah Megginson, editor of Your Investment Property magazine, said this unprecedented decision was made to encourage financial accessibility for households, who still don't know how to COVID- 19 should affect them.

"Until recently, there were signs that the economy was improving and that the housing market was rebounding. Latest unemployment figures from ABS show that the unemployment rate stood at 5.1% in February 2020, compared to 5.3% in January, and real estate prices ended 2019 at around 4% nationally, "said Megginson.

"It shows how much can change in a short period of time and with this decision, as well as other funding announcements, the Reserve Bank is trying to reassure Australians that it will take all measures possible to help them get through this period. . »

Although the situation is changing rapidly and fear and uncertainty prevail, Megginson warned the Australians to remember that current conditions will not last forever.

"At some point, the virus will be contained and the Australian economy will recover. In the meantime, a priority for the Reserve Bank is to support jobs, income and businesses, so that when the health crisis recedes, the country will be well positioned to recover strongly, "said Philip Lowe, Governor: Monetary policy decision.

The Reserve Bank will also provide a three-year funding facility to authorized deposit-taking institutions (ADIs) at a fixed rate of 0.25%. ADIs will be able to obtain initial funding of up to 3% of their existing credit.

"They will have access to additional financing if they increase their loans to businesses, especially small and medium-sized businesses. This installation costs at least $ 90 billion, "added Lowe.

"The Reserve Bank will also continue to provide liquidity to the Australian financial markets by carrying out repo transactions for one month and three months in its daily market operations until further notice. In addition, the Bank will engage in longer-term repurchase transactions with a term of six months or more at least once a week, as long as market conditions warrant. The various elements of this package are mutually reinforcing and will help reduce financing costs across the economy and support the provision of credit, especially to small and medium-sized enterprises. »

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