Will the RBA Ever Consider a Break in Tightening Policy?
The Reserve Bank of Australia has increased the cash rate by 25 basis points to 3.35% in February, as predicted by top economists from major banks. This marks the ninth hike by the RBA since May 2022, according to CreditorWatch’s Chief Economist, Anneke Thompson.
While consumers are starting to curb their spending and businesses have a less positive outlook for the coming year compared to 2022, the RBA wants to see sustained evidence of a slowing economy before considering a pause in rate hikes. Thompson noted that the RBA’s next move in March will depend on January’s retail trade figures.
A recent ABS report showed a 3.9% decrease in retail sales to $34.472 billion in December, with inflation hitting 1.9% quarterly and 7.8% annually. Thompson stated that the RBA’s efforts to slow the economy and cool inflation appear to be working and the extent of the cooling effect on businesses will determine the future of the cash rate.
Beware of Cashback Offers
Rate Money CEO, Ryan Gair, warns borrowers to be cautious of the cashback offers that banks may offer due to the rate hikes. He states that these promotions may do more harm than good and that curbing inflation requires consumers to reduce spending. History has shown that consumers tend to spend their cash bonuses rather than save or use it to pay off debt.
Gair advises borrowers to use the cashback wisely or opt for a home loan product that will be beneficial in the long-term. He stresses the importance of choosing the best product for a borrower’s financial health rather than a short-term gain.
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