7am Can the government claim a win from the RBA cut?
Feb 18, 2025
Emily Barrett, the managing editor of The Saturday Paper, dives into the Reserve Bank's recent interest rate cut, the first since 2020. She discusses the limited relief this offers mortgage holders and the modest savings compared to past hikes. Emily explores how this decision impacts the government's narrative ahead of upcoming elections, as well as the broader economic context of inflation and employment. She challenges traditional views on the relationship between these factors and critiques the Reserve Bank's strategies amidst changing public perceptions.
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RBA's Hawkish Cut
- The Reserve Bank of Australia (RBA) cut the official cash rate by 0.25%, the first cut in four years after 13 consecutive hikes.
- This "hawkish cut" signals that further cuts aren't imminent, as the RBA awaits more data on declining inflation.
Impact on Mortgages
- Major banks committed to passing on the rate cut, offering modest relief to mortgage holders.
- A $500,000 loan could see roughly $100 monthly savings, a small amount given previous repayment increases.
Reasons for Cautious Cut
- The RBA cut rates due to concerns about economic growth and low productivity, which restricts supply meeting demand.
- High house prices, the upcoming election, global uncertainty, a weak Australian dollar, and a strong job market contribute to the RBA's cautious approach.