RBA cut rates by 100 basis points
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The Reserve Bank of Australia cut rates by 100 basis points today to take the official cash rate to 3.25%. The cut comes on the same day as Prime Minister Rudd announced a $42 billion fiscal stimulus aimed at short and long term benefit to stimulate the Australian economy and protect jobs.
The RBA have now cut the cash rate by 300 basis points since September 2008 to the lowest point since 1964.
Next month is not likely to see as greater cut as those of recent months as the RBA look towards the Government’s fiscal stimulus to kickstart the domestic economy from the global turmoil inflicting markets.
RBA to slash rates
The Reserve Bank of Australia is expected to slash rates by 100 basis points this week as the Australian economy is in recession and looking down the barrel of a world economy that has badly derailed.
With the world in recession the RBA will need to act swiftly to reduce interest rates in a move to boost domestic growth and inspire confidence in a domestic economy that badly needs a boost amid rising unemployment and falling consumer spending.
With inflation no longer the problem, that it has been in recent years, the brake is no longer on Glenn Stevens allowing him to act decisively to boost domestic growth. The Australian government are also likely to support the domestic economy with another rescue package expected to be announced in coming days.
Australian Bank Watch will announce the rate cut when announced this week.
NZ slash rates by 1.50%
The Reserve Bank of New Zealand slashed rates by 1.50% to 3.5% in a desperate attempt to pump life into the severely faltering New Zealand economy.
The action by the Reserve Bank Governer of New Zealand is in direct response to the state of the world economy being in recession. The cut brings the official cash rate down by 4.75 since July 2008 to a record low since the introduction of the offical cash rate in 1999.
The cut which caught analysts unaware surprised the market who were expecting a cut of 100 basis points. Future NZ rate cuts are likely to be smaller indicating the lack of margin the RBNZ have to make a material impact on the economy going forward.
Bank of England & ECB slash rates
The Bank of England and the European Central Bank (ECB) have slashed rates to respond to faltering global demand as the world economy balances of the edge of the abyss.
The Bank of England cut rates to 1.5% down from 0.50%, the lowest rate in 314 years in an attempt to stop the economy from contracting. The English economy is in a dire position as the economy is set for it’s worst year since 1946 as the economy continues to contract at a record pace.
Meanwhile the ECB cut rates to 2% down from 2.50% as the economy continues to struggle and indicated more cuts could be on the way in an attempt to stimulate economic demand.
RBA set to cut by 0.75% in February
With the Australian economy struggling and fears of a doubling in the unemployment rate over the life of the current economic cycle the Reserve Bank are likely to react swiftly again by slashing rates by 0.75% in February. This would take rates to 3.50%.
The money markets have already priced such a cut into the market as the Australian economy balances on the edge of a knife with increasingly negative news each day.
With concerns of rising unemployment and falling GDP the interest rate cuts seem a certainty as the RBA is forced to react to prevent failing confidence in the economy. While the cuts with be a huge boost for home owners the general consenus is for harder times ahead as consumers prepare for a tough period in the economy with many fearing job cuts.
Australian Bank Watch Changes
I have made some minor changes to the Australian Bank Watch site. You will note on the left hand sidebar I have expanded the selection of variable home loan rates to include a number of leading Australian banks outside of the top 4.
I have also added the cash rates for the US Federal Reserve, European Central Bank, Bank of England, Bank of Japan and Reserve Bank of New Zealand. These complement the existing Reserve Bank of Australia cash rate that is also displayed. This will help visitors more quickly make a comparison between global central bank interest rates.
I have importantly added a date for when the interest rates were last revised. This should only be used as a guide and the interest rates should always be checked on the bank website which I have links attached for ease of navigation.
It is difficult to keep up to date with all the interest rate changes and they are quite liquid at the moment so I thought it wise to revisit the date I last updated. I will revise these on average once a month but also will update upon any Reserve Bank rate decision.
I have also expanded the links to a number of additional banks that were not previously listed and links to the major central banks.
I hope you find the changes of use and please direct any feedback or things you thing Australian Bank Watch should include to wes@ausbankwatch.com
Happy New Year!
Australian Banks interest rate margins expand
With RBA interest rates now at 4.25%, the same rate that was in place in 2002 it is easier to make an assessment of the margins being charged by the Australian banks.
In 2002 the average standard variable interest rate offered by the big four banks was 6.07%. The current average standard variable rate is 6.82%, an increase of 0.75% from the levels of 2002.
The banks will put this down to the global financial crisis and while funding costs have indeed increased it also reflects an amount of margin creep.
It is estimated that about 90% of all lending is currently being done through the big banks while has heavily impacted the smaller lenders and the lack of funding options has rendered the smaller lenders to be unable to compete in the current environment.
Hence these small lenders have had to increase rates as they are unable to source funds as cheaply as the big banks. This has impaired the local lending market and once again given the banks the upper hand once again against the consumer.
Westpac to cut credit card rates
Westpac has finally bowed to government and consumer pressure announcing plans to cut their interest rate of their credit cards.
Westpac cut their lowest credit card rate by 0.65% to 11.99% while slashing rates on other credit cards such as the 1.25% reduction to their Virgin Credit Card
The cuts will take effect from 15 December 2008.
ECB & UK Central Banks cut rates again
European Central Banks slashed rates overnight as the European Central Bank (ECB) cut rates by 0.75% to 2.5% while the UK Central Bank lowered rates by 1% to 2%.
The cut by the ECB was the biggest in the near 10 year history of the ECB, the cuts have now amounted to 1.75% in the last two months.
The UK Central Bank’s rate of 2% is the lowest since they were foundered in 1694 and reflects the pain being experienced in the UK.
Both the ECB and UK Central Bank have indicated further cuts are likely in coming months.
Reserve Bank of NZ cut rates by 150 basis points
The Reserve Bank of New Zealand drastically cut rates today by 150 basis points in an attempt to stimulate the domestic economy.
The Reserve Bank governor Alan Bollard cut rates to 5% and indicated that they were prepared to cut further in the face of slowing domestic demand.
Reserve Bank governor Alan Bollard said prolonged market turmoil and the marked deterioration in the global growth outlook “played a large role in shaping today’s decision.”
The Reserve Bank of New Zealand have cut their offical cash rate by 325 basis points since July as the domestic economy has started to contract.