Well, what a swifty the RBA pull today, eh? 100 basis points and Devil take the hindmost. Whack that up yer kilts, all you snake-oil salespersons. Only goes to prove my belief that economists know diddly-squat about what the central bank may or may not do in relation to any given economic circumstances.
Of course, there are a variety of rationales behind this move, not the least of which is clear and decisive action by the central bank to inject more confidence into the Australian lending marketplace. I note that the ‘Four Pillars’ have all deigned to pass on 80 of the 100 basis points, for which all of we mortgage holders and potential borrowers should be dutifully and respectfully grateful. Yes….well….
Equally, the RBA has fairly and squarely placed considerable onus on the ‘Four Pillars’ to do something constructive with what is surely a gift. We’ve not seen a cash rate cut of this magnitude for 16 years, during the recession we had to have. Of course, that historical link does draw uncomfortable conclusions, but right now, Australia’s economy is not in recession, and isn’t likely to slide that way in the immediate future. However, if one percent isn’t enough to engender increased confidence, all bets are off.
I read Macquarie Bank’s rate strategist claiming, before the RBA made it’s announcement, that in his opinion the cash rate was on it’s way down – 7% to 6% to 5% and possibly as low as 4.25%. Too early to call, and do remember, dear reader, that whatever happens in the States, often takes time to translate to our part of the world. We’re shielded somewhat by our S.E.Asian neighbours and the trading relationships there, but everything is continuing to point to further economic unrest to come.
A reader in another place asked me recently what I’d suggest for a self-funded retiree to do in these unsure times. I’m not an accredited advisor, so all I could offer was cutting of un-necessary expenses and jettisoning luxuries, like cable TV unless well it’s utilised, and hanging on tight. The ride will get bumpier yet. 100 points? Let’s wait and see, shall we?