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RBA makes last call on official cash rate for 2020

Adrian Flores
Adrian Flores
01 December 2020 1 minute readShare
RBA

The Reserve Bank of Australia has made its final call on the official cash rate for this year following its decision last month to cut the rate to a historic low.

In line with expectations, the RBA has held the cash rate at a record low of 0.1 of a percentage point. According to Finder, all of its featured experts forecast the decision to hold the cash rate.

CreditorWatch chief economist Harley Dale said the decision was “universally expected”, saying the RBA fired its last interest rate “bullet” in November.

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“The RBA is pleased with the substantial stimulus that the federal and state governments have provided,” Mr Dale said.

“The combination of super low interest rates and hefty fiscal policy has created the defensive line Australia required in 2020 to avoid the chronic impact that COVID-19 is having in Europe and the United States. It is also worth remembering that the OCR is not the only weapon in the RBA’s armoury.

 

“The bank’s policy of buying government bonds will lower the debt servicing costs stemming from the massive fiscal policy stimulus our governments have undertaken. A widely anticipated strong result for gross domestic product (GDP) for the September 2020 quarter (out tomorrow) was also part of a more positive tone to the RBA’s interest rate statement.”

Even though the RBA’s next cash rate meeting is in February 2021, Mr Dale said he no doubt will keenly watch the performance of the retail sector over Christmas and the holiday season.

He pointed to CreditorWatch’s own data revealing the struggles the retail sector has experienced, and that the data in the coming months will provide a leading indication of whether the retail sector is indeed on a sustained path back to healthier trading conditions.

“It is widely expected that this sector, battered by the adverse consequences of COVID, will enjoy better returns in December/January than was considered likely even only a few months ago,” Mr Dale said.

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RBA makes last call on official cash rate for 2020
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Adrian Flores
Adrian Flores

Adrian Flores is the deputy editor of MyBusiness. Before that, he was the deputy editor for SMSF Adviser as well as features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.

You can email Adrian at [email protected].

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