RBA makes first cash rate decision for 2020

The Reserve Bank of Australia has made its decision on interest rates following its February meeting as the bushfire emergency and coronavirus outbreak weighs heavily on the Australian economy.

The RBA has left rates on hold with improved employment data likely buoying the bank’s outlook. 

The cash rate remains at 0.75 per cent.

However, it’s unlikely that this will be the end of the RBA’s successive cuts, with natural disasters and the economic ramifications of the coronavirus outbreak making another cut in the near future likely. 

“With the economy a long way from the RBA’s full employment and inflation objectives, the bushfires likely to knock growth in the short term and the China coronavirus posing a new threat to global growth and tourist arrivals, the RBA should be cutting rates at its February meeting,” AMP chief economist Shane Oliver told Finder’s survey.

“But against this it may decide to wait a bit longer given the decline in headline unemployment reported for December. Given the latter, we lean towards the RBA cutting in March. But it’s a close call and a February cut would not be surprising.”

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The RBA is also likely considering the impact that another cut could have on consumer confidence, which has taken a hit due to the bank’s inability to communicate its intent. 

“There’s a large gap between what the RBA is saying, and what families and businesses are hearing,” Deloitte Access Economics wrote in its Business Outlook report in January. 

“The RBA is boosting the economy both because it is weaker and because it is different. The first factor should worry families and businesses, but the second – a different economy, with more profits and more jobs but less by way of wage gains – is a mixed blessing.”

The next cut, when it comes, will bring the cash rate to 0.50 per cent – just a single cut from the point where RBA governor Philip Lowe has said he would consider instituting a quantitative easing program. And with the Australian economy now beset on all sides, it seems likely that there will be another cut soon.

RBA makes first cash rate decision for 2020
RBA
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