lower interest rates

RBA Reduces Interest Rates in 2020

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Sarah Boyle

The Reserve Bank of Australia has made headlines over the past few days for cutting interest rates to a record low in light of the ongoing Covid-19 pandemic. The move, which stands as part of the RBA’s first quantitative easing program ever, will provide more affordable loans for Australian banks, along with interest rates being cut to 0.25 per cent.

The concepts behind this move by the RBA have also been echoed by a variety of other large institutions in the past fortnight, as efforts are well underway to preserve businesses and the livelihoods of families during this difficult time. However, this also comes at a time of concern for the Australian economy, which has seen a massive dip in the local stock market as a direct response to the current emergency.

What Else is the RBA Doing to Combat Potential Losses?

As well as reducing interest rates, the RBA has also agreed to provide approximately $90 billion to banks at this new low-interest rate as a means of protecting small to medium businesses (or SMEs) over the next three years. While some losses in both income and jobs are still projected to occur, these supplemental loans will hopefully allow the majority of Australian businesses to manage their finances until the current situation stabilises.

What’s Next?

The RBA has claimed that it will do whatever it takes to get Australians through this difficult period, and economists have suggested that nothing is likely off the table in regards to potential solutions. While it may be difficult to speculate given the current uncertainty of the situation, the Australian government has shown that it is willing to take drastic measures to ensure the security of the Australian economy and workforce.

How Will the Properties Be Affected by the Current Situation?

Although it has been suggested that the Australian real estate market will be impacted by current events, we are yet to see any significant changes as of writing. Currently, the preliminary auction clearance rate sits at 61.3 per cent, which is up on the previous year. There have also been no notable changes to median house prices.

Whilst new developments are being announced all the time; current projections still look hopeful for property owners. This is especially true for those renting out their investment properties, as the government has announced plans to provide rental assistance to those who have had their wages impacted by the pandemic.

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