The October rate rise decision by the Board of the Reserve Bank of Australia (RBA) has lifted the official cash rate to the highest level in 9 years. A rise was expected though there has been pressure building from comments from analysts and other finance and economic experts for the RBA to start easing the rate of its increases. The significant and substantial rate rises over a relatively short space of time was noted by the Board as an issue it reflected on for its October decision.
The RBA delivered a 0.25% increase to the cash rate which was at least less than the 0.5% which had been implemented in the four previous months. While less than expected but not as low as hoped by many, the RBA October rate rise will have an impact on interest rates across many lending markets. By how much will vary across the wide selection of banks and non-bank lenders and potentially vary in different categories of finance and loans.
Following the latest rate rise those requiring finance may benefit from the services of Jade Finance to secure the cheapest interest rate finance and loans. With more choices of lenders from just the one contact, the process of sourcing the cheapest interest rates for cars, bikes, boats, caravans, trucks and business equipment is simplified and streamlined.
For those looking further ahead, we have summarised the major issues and indications as provided in the RBA’s October Rate decision statement to assist with timing those purchases of goods with finance.
Latest RBA Rate Decision
While most people will hear the news of an interest rate rise via media, it can be worthwhile to read the official statement from the Governor of the RBA, Philip Lowe. These monthly statements include information on the Board’s thinking in making that decision, its outlook for the future and what factors it sees as creating uncertainties moving forward.
The statement issued on 4 October announced the 0.25% rate rise which takes the official cash rate to 2.6%, the highest since 2014. The Board remain committed to returning Australia’s high rate of inflation back to the RBA’s target level of 2% to 3%. It says this will be done over time.
Those wondering about timing for purchases of goods with finance will be interested one of the opening comments that further rises in the cash rate would be expected to be needed to achieve the objectives. Note that the RBA Board has its next meeting regarding the cash rate on Tuesday 1 November. As noted in the statement, the Board will be considering data and economic conditions when making decisions about future rises.
Other points of note include:-
Australia’s rate of inflation is considered too high and is being driven to a large extent by the effects of global issues. But strong demand and constrained supply domestically are also contributors.
The Board stated an expectation that inflation would continue to rise in 2022 to around 7.65% then drop to around 4% into 2023 before starting to near the target 3% in the next year.
The tight labour conditions remain as can be seen in the 3.5% unemployment rate in August. Further falls are forecast by the Board before increases start to be recorded as economic growth begins to slow.
The uncertainties around the economic environment were identified primarily as the conditions in the global economy which have deteriorated even further recently. Jim Chalmers, the Federal Treasurer, also expressed these concerns in a recent press conference. He said that a global recession was now probable rather than just possible.
Another uncertainty for the RBA lies in how consumers respond to the increases in interest rates with spending. The Board also notes that it is keeping a watchful eye on labour costs and pricing by enterprises.
Finance and Loan Considerations
This is the sixth consecutive month that the RBA has raised the cash rate and the Board has indicated more increases can be expected. Those that already have finance and loans for goods with a fixed interest rate will not be impacted by these rises.
Lenders will however, respond to cash rate hikes, in line with their individual company policies and their own forecasts. The lending market in many sectors, especially motor vehicle finance, can be vast and highly competitive. Rapid and repeated rate rises such as we are currently seeing can have the potential to create an even more varied rate range in a particular loan category.
More lenders and more variations can mean more work for loan seekers in finding which particular bank or lender is currently offering the best rate and the most suitable type of loan. The key aspects being the lowest rate but also a fixed not a variable interest rate. That hard work is done for Jade Finance customers by our consultants. We have access to more lenders which provides customers requiring both business finance and personal loans for goods with a quick and easy solution.
Regardless of how lenders respond to RBA rate rises, we will maintain our policy of achieving better rates across our loan and finance portfolio.
Contact Jade Finance 1300 000 008 for quick and easy sourcing of cheaper interest rate loans and finance.
DISCLAIMER: NO LIABILITY IS ACCEPTED IF ERRORS OR MISREPRESENTATIONS ARE FOUND IN THIS ARTICLE. THE ARTICLE IS PREPARED AND PRESENTED FOR GENERAL INFORMATIVE PURPOSES AND IS NOT INTENDED TO BE THE SOLE SOURCE OF INFORMATION FOR MAKING FINANCIAL DECISIONS. THOSE REQUIRING GUIDANCE AND ADVICE SHOULD CONSULT A FINANCIAL ADVISOR.