In this edition:
Further downward movement is possible
For most of 2014 the debate around interest rates had been focused on when the RBA would lift the official cash rate from its record low level.
However, the RBA's decision to lower the official cash rate last week has changed the discussion on this issue, with their decision signalling a new downward trend. Many of Australia's leading economists and major banks are forecasting the next movement in the cash rate will be downward, while the Commonwealth Bank and ANZ believe any movement upward may be delayed until the end of the year, or even 2016.
Westpac's forecast released late last year included not only a 25 basis point cut this week but a further cut of 25 basis points next month, reasoning that the RBA would not have disturbed such a long period of interest rate stability for just one move. This is consistent with the RBA's previous indications that it would not lower the rates once if it did not see the case for multiple rate cuts.
Another 0.25 per cent cut will take the cash rate to 2 per cent in the months ahead. The forecast lower rates, if passed on by the banks to mortgage holders, signal good news for home owners, providing an outlook of affordability for the majority of the year ahead.
If you wanted to discuss how the rate change impacts your personal situation contact your GCC staff member or Stuart Davey from GCC Financial Solutions.
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