RBA hold rates at first meeting of 2020

RBA hold rates at first meeting of 2020
Joel RobinsonDecember 7, 2020

The RBA kept the official cash rate at a record low 0.75 per cent at its February meeting, the first of 2020. 

Tim Lawless, CoreLogic's head of research, said the result wasn't a surprise given the ongoing uncertainty brought about by the extent of the bush fires and the unfolding implications of the Corona virus outbreak.

"The RBA may need to keep some rate cutting ammunition up their sleeve should these scenarios play out more severely than expected.", Lawless said.

"To date, lower interest rates haven’t flowed through to a material improvement in economic conditions, but housing markets have well and truly responded, with national housing values rising 6.7% since the first rate cut in June through to the end of January. 

Lawless said that, importantly, we may be seeing some early signs that strength in housing markets is transferring through to other sectors.

"Dwelling approvals recorded their first annual rise since mid-2018 and the value of new mortgage commitments up 5.9% over the year to November, driven by a 10% increase in owner-occupier commitments. 

"Although rates remained on hold today, we are expecting the RBA to cut the cash rate later in 2020. 

"Further rate cuts could fuel home buyer demand, although we don’t expect future cuts to the cash rate to be passed on in full to mortgage rates.

 Finder's RBA survey suggests the retail slowdown will continue as the cash rate holds.

Some 79 per cent of survey respondents said we will see further store closures through 2020, following the likes of retailers Big W, Bose, Curris Planet and EB Games all closing stores.

Graham Cooke, insights manager at Finder, said the outlook is grim.

“While FMCG retailers such as Woolies and Coles will generally continue to operate successfully, clothing and other retailers must adapt or perish", Cooke said.

“In an environment where people are spending less and ordering more online – if you don’t have a seat at the table, you might be on the menu.

 Mozo director Kirsty Lamont says the likelihood of a cut in the next few months is very high.

“The full economic impact of the bushfire crisis and coronavirus is still unknown and the RBA will need to account for these factors to an already stagnant economy", Lamont said, adding that recent improvements in employment and inflation data gave the Reserve Bank enough breathing room to hold rates.


Joel Robinson

Joel Robinson is a property journalist based in Sydney. Joel has been writing about the residential real estate market for the last five years, specializing in market trends and the economics and finance behind buying and selling real estate.

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