RBA doesn’t budge, keeps interest rates at 0.75% in November

Niko Iliakis

Tuesday 05 November 2019

It looks like the Reserve Bank will be taking a breather this month. Despite some chatter about consecutive cuts, it decided against decreasing the cash rate in its November meeting this afternoon, keeping it at a record low 0.75%.

"Employment has continued to grow strongly and has been matched by strong growth in labour supply, with labour force participation at a record high," said RBA Governor, Philip Lowe.

"After a soft patch in the second half of last year, a gentle turning point appears to have been reached. The central scenario is for the Australian economy to grow by around 2¼ per cent this year and then for growth gradually to pick up to around 3 per cent in 2021."

RELATED: October rate cut: Which banks have cut home loan rates already?

While many were betting on a November cut only a few weeks ago, opinion shifted following Lowe’s appearance at an International Monetary Fund panel in Washington in October. 

There, Lowe talked up improved conditions on the job front, signalling that the RBA was content to step back for a bit and give the low interest rates more time to deliver results.

The decrease in unemployment comes at a critical time. Most Australians have cottoned on to the fact that the economy is quite vulnerable at the moment — a second set of back-to-back cuts would have eroded consumer confidence further.

Not long after, results from the September quarter registered a marginal improvement in inflation - up from 1.6% to 1.7% - which further eased some of the pressure currently on the RBA.

"The central scenario remains for inflation to pick up, but to do so only gradually. In both headline and underlying terms, inflation is expected to be close to 2 per cent in 2020 and 2021," Lowe said in today's minutes.

What’s the outlook for the economy?

While Lowe is currently leaning into his role as cheerleader by playing up the economy’s strengths, it’s clear the country still isn’t tracking in the preferred direction.

A lot of that comes down to a lack of government support. According to Mozo’s banking expert, Peter Marshall, since the RBA began cutting interest rates back in June, it’s had to shoulder much of the responsibility of keeping the economy afloat.

“Aside from the tax refunds, the government has mostly been trying to jawbone banks to drop their rates and to lend more money,” he said.

What do home loan interest rates currently look like?

Despite this month’s decision to keep the cash rate unchanged, the previous three cuts have seen home loan rates enter record low territory.

At this point, most of the rate changes made in response to October’s cut have been implemented, giving us an average variable rate of 3.73% p.a. At the time of writing, the top four slots in our database are occupied by the following lenders.

Variable rate home loans (OO, P&I)

LenderHome loanRate
HomestarStar Essentials Home Loan2.74% p.a. (2.77% p.a. comparison rate*)
AthenaVariable Home Loan2.84% p.a. (2.80% p.a. comparison rate*)
Loans.com.auSmart Home Loan2.88% p.a. (2.90% p.a. comparison rate*)
UBankUHome loan - Discount Offer2.99% p.a. (2.99% p.a. comparison rate*)

With most banks only passing on a portion of last month’s cut to variable home loan customers, competition is expected to remain quite strong. 

Online lenders in particular have been locked in a race to keep rates low, and we’ve been able to count on a handful to pass on the full rate cut on all three occasions this year.

What about savings accounts and term deposits?

Unfortunately, we’ve also seen plenty of cuts levelled against savings accounts and term deposits. Right now, the average ongoing savings accounts rate is a paltry 0.99% p.a. And among the big banks, it’s even lower — 0.59% p.a.

The good thing is that when the RBA does cut rates next, banks will likely exercise a bit more restraint when reducing savings account rates than they have in the past. 

Plenty of Australians have been grumbling about cuts to deposits lately, and according to Marshall, it’s only a matter of time before banks start reasserting their need to maintain their margins.

“Rates have dropped really drastically over the last six months, and I think banks will have to do something soon otherwise they’re going to start running out of deposit funds,” he said.

For a look at the kinds of rates currently out there, pay a visit to our savings account comparison page. And if it’s home loans you’re after, be sure to check out our home loan comparison page, where you’ll be able to filter your search to find one that suits you.

*WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for the amount and term you entered.

Read our last month Reserve Bank interest rates update

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