So the RBA has cut rates: What next?
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RBA Cash Rate
RBA rate news and expert forecasts
1.25%
Cash rate cut
to 1.25% on Tuesday 4 June 2019
The Reserve Bank of Australia (RBA) sets the official cash rate target on the first Tuesday of every month except January. Below are expert forecasts from the Finder's RBA Cash Rate Survey™ of some of Australia's brightest minds in economics and property. You can also learn more about the RBA and how its decisions influence the interest rates banks charge, and learn about the best strategies for home owners and investors when there's a rate cut, hold or rise decision.
95%of our resident rate experts
correctly predicted a cash rate cut to 1.25% on Tuesday 4 June 2019 View forecasts →
Next meeting: 2:30pm 2 July 2019
What our experts think the next RBA move will be
As of June 2019 100% of the experts in our panel think the next RBA rate move will be a cut.
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Our resident rate experts
Find out what each of our experts predicts for next month and their detailed forecast explanations
RBA has clearly signalled its intention to cut rates and with its nominated sensitivity measure of unemployment now on the rise is set act. The release of the ABS GDP data for the March qtr the day following the rate announcement will encourage the Bank to cut to be seen to be acting to stimulate the economy ahead of what is likely to be yet another underwhelming result for the economy.
The Governor flagged a cut and there's little point postponing what the RBA deems inevitable. With prices approaching the bottom of the cycle, interest rates potentially declining further, and an easing on lending restrictions, the signs point to the emergence of a buyer's market in the residential sector.
Low inflation and weak economic growth.
This view is based off recent comments by the Governor of the Reserve Bank that indicated a shift towards quantitative easing.
The RBA announcement this week has confirmed that unemployment sub 5% with low inflation can support at least 50 bps off rate cuts.
Economy slowing faster than they thought.
The RBA has backed itself into a corner. The latest unemployment stats should now force its hand.
There is no question that cash rate cuts are on the cards this year and there's enough evidence to suggest that the first rate cut will occur in June. We have seen some deterioration in the labour market, with the ABS' most recent Labour Force data revealing the unemployment rate grew to 5.2% in April. The stubborn inflation rate is sitting at 1.3%. The combination of these key economic measures suggests a decrease to the cash rate would be appropriate this month.
Growth has slowed, inflation has slowed well below target, unemployment looks like it is now starting to rise when it needs to be falling to get inflation back up and the RBA has recognised all of this (and moved to an easing bias).
The Governor of the RBA has more or less announced there will be a fall. It is clear that the RBA were considering it before the election but for political reasons did not, as it would not do to be interpreted as a signal favouring either major party. The economic fundamentals now warrant a small change. Whether or not the banks follow through with a cut in their rates remains to be seen.
Bias is clearly to the easing, however the RBA may choose to wait for the new financial year for a range of reasons including the finalisation of the budget bills (which get through and which don't) and how geo-political issues play out on the global stage and markets.
N/A
Given the election results (and thus the policy implications), the proposed changes by APRA and the slight improvement in housing market, this may be an ideal time for a reduced cash rate to have an effective impact on the economy.
The accelerated downturn in new dwelling construction activity.
Most recent comments have been around unemployment being targeted through expansionary monetary policy without impacting inflation.
With inflation undershooting the target range, credit growth low and unemployment rising, now is the time for the RBA to provide some monetary stimulus.
Their last set of minutes made up excuses not to cut during the election campaign. So they'll cut. They should cut by more but I doubt they will.
Our employment is steady.
It's likely the RBA will cut the cash rate in June due to an ongoing combination of factors, in particular, some weakening in employment growth, weaker GDP data and the below target inflation rate.
Given inflation and wages remain stubbornly low, combined with a softer outlook for employment market. We expect the RBA to cut the official cash rate to 1.25% at its June board meeting. This rate cut combined with the return of a Coalition government, APRA easing lending restrictions and the new first home buyer deposit scheme will see confidence return to property markets and in-turn increase transaction activity.
Statements by the Reserve Bank Governor.
I've gone against popular opinion and have held off calling a cut until now. I think this month will be it. While there has been a lot of poor economic data coming out, it looked like the RBA were holding on to the low unemployment rate as a sign that things were about to improve. With the unemployment rate ticking up in April, I think this will be enough impetus to make a decision to cut.
My previous thinking was that interest rates would start coming down during the second half of the year. However, recent events strongly indicate a fall in rates will likely occur sooner than previously thought. Chief among these is the RBA Governor's public announcement that an interest rate cut is on table at the next meeting. That's a pretty obvious indicator of where rates are headed and when. This announcement was predicated on a stuttering economy and the RBA's apparent view that the economy can support an unemployment rate below 5% and low interest rates simultaneously, without causing serious upwards pressure on inflation. Combine this with APRA's relaxation of the minimum 7% floor when assessing borrowers' capacity to pay, the returned Government's planned reduction in tax rates and calls for increased infrastructure spending, there is a clear expansionary focus which would be supported by reducing interest rates and consequently, the cost of borrowing.
Latest jobs data slightly weaker, in contrast to RBA expectations in their SOMP, so (as indicated in Philip Lowe's recent speech) enough reason for some fresh monetary stimulus.
Reiterating my last response, the RBA should cut by 25 basis points this Tuesday. Break even inflation is just 1.2 % pa, & f/t employment growth was negative in the last ABS survey.
Spike in unemployment numbers will give the RBA confidence to move on interest rates.
I am probably wrong but i think dropping would be a very bad policy - hope the bank realises that.
The board has observed the Australian economy has slowed.
Such a move is consistent with the recent comments by the Governor. the economy has the capacity to grow at a stronger rate and lower interest rates will achieve such an outcome.
Lowe's speech guided to a rate cut- slowdown, lower inflation, rising unemployment, falling NAIRU and forecast assumes 2 rate cuts.
The labour market has now joined the deterioration in the rest of the economy.
A slight increase in unemployment and 'underemployment' add to the weak Q1 CPI figure, which was then compounded by a 1.90 pct fall in Q1 'construction work done'.
RBA likely to cut on back of latest inflation number. Only possible alternative is that they announce a change to the inflation target, but this is unlikely without some more public discussion.
The RBA has finally acted in a decisive manner, signalling its intent to cut the official cash rate at its June meeting. It is now incumbent on the RBA to give clear guidance on the future path of monetary policy beyond its June meeting.
Pre-announcement RBA Press Releases
- Borrowers in hot seat as rate cut beckons
- New low? Crunch time for the cash rate
- RBA Survey: Property prices to tumble up to $60K by 2020
- RBA Survey: 2 rate cuts coming in 2019, say experts
- RBA Survey: Experts predict cash rate cut to come, not hike
- RBA Survey: House values to plummet by up to $194,000 – December, 2018
- RBA Survey: Apartment prices to drop by up to 8% by end of 2019 – November, 2018
- RBA survey: House prices to plummet 8% by 2021 for eastern capitals – October, 2018
- Rates up, prices down: Experts predict housing downturn will last 2 years – September, 2018
- Greater supply could give first home buyers a ticket into the property market – August, 2018
- First-time buyers in QLD & ACT set for longer waits, experts say – July, 2018
- Royal Commission silver-lining: Banks will operate to a higher moral standard – June, 2018
Post-announcement RBA Press Releases
- New low puts borrowers on a $21,000 high
- Cash rate in limbo – but not for long
- 1 in 2 mortgage holders struggle to pay as cash rate holds
- RBA Survey: Will the big four banks bounce back?
- RBA Survey: House prices to keep falling in eastern capitals
- RBA Survey: Stricter lending by banks will hurt the economy
- RBA Survey: Royal Commission fallout to see small lenders favoured – November, 2018
- RBA Survey: Aussie economists predict regulators will ban credit card surcharges – October, 2018
- RBA survey: Experts on the fence about “honeymoon” rates for mortgage holders – September, 2018
- Turbulence in the home loan market: Out-of-cycle rate hikes to continue – August, 2018
- Economists split on banks’ treatment of businesses – July, 2018
- A buyer’s market: House prices to tumble in 2018, but two cities may buck the trend – June, 2018
How has the cash rate changed over time?
The graph above shows the movement in the official cash rate target. A lower cash rate reduces the cost of borrowing money so more people are encouraged to borrow - stimulating the economy. Higher interest rates tend to encourage spending. This is how a rise or fall in rates affects the level of supply and demand and therefore the level of inflation - which the RBA wants to keep in the target range of 2%-3%.
What is the official cash rate and who sets it?
Once a month, the RBA board meets to decide whether to raise the cash rate, lower it or keep it the same. Their decision will be influenced by a wide range of factors including inflation, the performance of the Aussie dollar, the housing market, Australia's Gross Domestic Product (GDP) and levels of consumer confidence. The board will assess all of these factors in relation to the RBA's goals and objectives before reaching a consensus on what to do with the official cash rate.
The RBA's monetary policy aims to achieve three key objectives which are set out in the Reserve Bank Act 1959:
- The stability of the currency of Australia;
- The maintenance of full employment in Australia; and
- The economic prosperity and welfare of the people of Australia.
In order to reach those objectives, the RBA sets an inflation target of 2-3% over the medium term. In other words, the RBA wants the Consumer Price Index (CPI, based on the average prices for a range of common goods and services) to increase by between 2 and 3 per cent each year.
The bank can control inflation by making adjustments to the official cash rate. For example, if inflation rises above the target rate it means that Australians are spending their money too freely and prices are increasing too rapidly. But if the RBA raises interest rates to make it more expensive to borrow money, the economy will settle and price increases will slow down. Conversely, the RBA will drop interest rates if inflation is too low and the economy is stagnating, encouraging more Australians to spend more money and stimulate economic growth.
How the cash rate can impact your finances
See how the cash rate changes can affect your savings, term deposits, home loans and what you can do about it.
If the rate rises
Find an account which offers the same features and fees but with a better rate.
If the rate gets cut
Consider comparing a competitive term deposit rate so your interest earnings don't suffer.
If the rate holds
Carry out a quick comparison to make sure you're getting the best return on your money, see what promotions banks are offering.
If the rate rises
Ask your lender for a rate discount so that if rates do rise you won't be worse off, or alternatively, compare other variable or even fixed rate home loans to find a better deal.
If the rate gets cut
See how your lender responds to the cut. If they don't pass on the full rate cut, ask for a rate discount, and if you're still not happy start comparing what other deals are in the market. Some lenders have been known to pass on more than the official rate cut after an RBA announcement!
If the rate holds
Compare other variable rate home loans to make sure you're still getting the best deal. If rates are tipped to rise in the near future you may also want to compare fixed rates.
If the rate rises
Your rate won't rise as you locked it in, so you can relax a little. If your fixed rate is soon to end, start comparing what deals are being offered so you don't find yourself scrambling to lock in another rate.
If the rate gets cut
If you feel your home loan is no longer competitive, you might want to obtain a quote from your lender to find out possible exit costs. If this figure is reasonable, you might want to consider comparing variable home loans. Use our switching costs calculator to see if you'd save.
If the rate holds
Because your rate is fixed for an agreed period of time, a decision by the RBA to hold won't have as much of an effect on you depending on how long you still have to go in your fixed term. As mentioned above, you might still want to monitor the other deals in the market to keep informed.
If the rate rises
If rates rise, savings accounts rates could be increased as well. If this happens, you might want to compare the rates of high interest savings accounts. Remember that most term deposits have interest penalties if you withdraw your funds early, so keep this in mind.
If the rate gets cut
Your rate won't change because it's locked in, but if you're nearing the end of your term start comparing both high interest savings accounts and term deposits to find a good deal.
If the rate holds
Compare accounts and ensure you're aware of what's being offered in the market.
RBA news and announcements
RBA rate cut: What it means for your savings
Australians could soon be earning even less interest on their savings with the RBA today cutting the official cash rate to 1.25% after 30 months of no movement. Read more…
The Reserve Bank has cut the cash rate for the first time since 2016: Here’s what it means for your mortgage
As variable interest rates drop, borrowers really need to look for a better deal. Buyers should note that lower rates could push prices back up. Read more…
The Reserve Bank holds the cash rate at 1.50% for the 28th time, while most experts predict further cuts
75% of the experts in Finder's latest survey now say the RBA will cut the rate again in 2019. Read more…
Many experts predict further RBA cuts to the cash rate in 2019
60% of experts surveyed by Finder now predict more cuts to the cash rate, but what would that mean for borrowers? Read more…
Ask an Expert
how long can AUD interest rate remain Low…..?
how soon will the AUD follow the US FED Rate Hike…….?
thank you
Hi Octo!
Thanks for getting in touch!
To know more information on your questions, you can fill in your email address in the box provided and you’ll be updated on RBA’s decisions on the official cash rate target.
While we provide you with general information, please know that we don’t stand as a representation for RBA or any company featured on our site.
Hope that clarifies!
Cheers,
Nikki
Do you think the cash rate will stay the same at the June RBA meeting?
Hi Taneesha,
Thanks for getting in touch with finder. I hope all is well for you. :)
Unfortunately, we are not in the best place to make a prediction. However, you might get an idea whether the RBA cash rate will rise or fall by looking at the factors that affect it. These factors may include:
– Household debt
– Inflation
– Wage growth
– Consumer Confidence Index
– Unemployment
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
What do you think that how the international economic condition influence the cash rate?
Hi Brook,
Thank you for getting in touch with finder.
This is nice question. Domestic financial conditions remain expansionary. There has been some tightening in short-term
money markets, which has flowed through to a small increase in funding costs for a range of financial institutions and businesses. However, borrowing rates remain low for households and businesses. Growth in housing credit has eased since mid last year, particularly for credit extended to investors, while growth in business debt has remained moderate. The Australian dollar remains within its narrow range of the past two years. Financial market prices suggest that the cash rate is expected to remain unchanged this year and to increase around mid 2019. If you are eager to learn more about the domestic financial condition according to RBA, please check out this link.
I hope this helps.
Have a great day!
Cheers,
Jeni
What do you think will be the next move for RBA on cash rate and when?
Thank you!
Hi Rob!
Thanks for the comment.
As of the moment, most of resident rate experts predict that rates will be the same. The cash rate target is released on the first Tuesday of every month except January.
You can follow the updated forecast right here.
Hope this helps.
Cheers,
Jonathan
Thanks Jonathan, I meant in the longer term, 6-12 months.
Hi Rob!
We appreciate your follow-up.
Currently, there are multiple factors that need to be considered and due to the volatility of these factors, it is a bit hard to conclude whether they’ll leave the rates unchanged for the next few months or not.
If you have further inquiries, you may contact:
Media and Communications
Secretary’s Department
Reserve Bank of Australia
SYDNEY
Phone: +61 2 9551 9720
Fax: +61 2 9551 8033
Email: rbainfo@rba.gov.au
Hope this helps.
Cheers,
Jonathan
When do you think the RBA will start raising rates?
Hi Julie,
Thank you for contacting finder.com.au we are a financial comparison website and general information service.
It is hard to predict the movement of the cash rate as it is based on a multitude of factors that are continually changing however 7 out of the 38 experts we surveyed in our latest RBA survey for September 2016 said they predict it will start going up in July 2017 or beyond.
Regards
Jodie
Hi Belinda
Appreciate if you would also send me informations regarding findings of monthly RBA survey.
Regards
Eric
Hi Eric,
Thanks for getting in touch.
On this page, you can view the RBA Cash Rate Target Announcements for each month from February 2015 until February 2016. You can also view the commentary of our resident rate experts in the lead up to each Board meeting which occurs on the first Tuesday of every month (except January).
Please feel free to sign up to receive our detailed RBA cash rate updates by completing the form provided above.
Regards,
Belinda
Hi,
My new house is ready now and wondering what is the best time to sell, should I put my house in the market now or January or wait for the February. I am not committed any where so I can wait.
Your advise needed.
Thanks
Hi Syed,
Thanks for your enquiry.
As finder.com.au is an online comparison service so we are not licensed to give you personal advice regarding the best time to sell your property.
You can read our guide here about considerations when selling your house.
All the best,
Belinda
hello.
i wonder if i could receive some information regarding not only the latest current economic situation, but also cash rate movements over the year.
Hi Dongho,
Thanks for your enquiry.
Above on this page you can view the ‘Reserve Bank monthly announcements’ to read about the cash rate movements and monetary policy decisions that have occurred over the course of this year. You can also sign up to receive our RBA cash rate updates by filling in the form provided above.
In regards to the current economic situation, finder.com.au is an online comparative website and we can’t comment on the activity of the broader Australian economy.
Thanks,
Belinda
Can you please send through the information on the RBA via email?
I’m doing a school Economic assignment on the RBA and financial markets
Hi Oli,
Thanks for your enquiry.
I’ve emailed you with some information regarding the findings from our monthly RBA survey.
Please note that on this page you can sign up to receive our RBA cash rate updates.
Thanks,
Belinda
Hi,
I was just wondering if I could have information regarding how interests rates will unfold over the next year. In particular, if the current interest rates will be appropriate for the economic conditions in Australia.
Thank you
Yazmin
Hi Yazmin,
Thanks for your enquiry.
Firstly, I’d like to point out that finder.com.au is an online comparison and general information service so we’re not in a position to forecast interest rates.
However, on this page you can sign up to receive our RBA cash rate updates which you might find useful.
Thanks,
Belinda