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September interest rate and lending environment update

In the September meeting of the Reserve Bank of Australia (RBA), the board decided to leave interest rates unchanged. The RBA is playing a ‘wait and see’ game, with no clear indication that inflation is due to increase, but at the same time, no sufficient data to show that the economy is in need of further stimulus.

The RBA feels that more time is needed before the full impact of the August rate cut can be measured. Despite the fact that most job growth has been in part-time employment, the unemployment numbers look very solid at the moment. Building is still strong, just not at the peaks that we’ve seen recently. In light of the strong economic position, it was recently noted that Australia has had 25 years of uninterrupted economic growth – a record unmatched in the developed world.

Despite all this good news and the fact that we’ve had the best economic growth since 2012, there is a genuine possibility of a further rate cut before the end of the year if job figures deteriorate or we don’t see inflation increase.

The lending environment has been very stable over the past month. There have been very few policy changes, and most people are getting loan applications approved. The quality of a loan application is still paramount, but what is interesting is pricing. None of the banks are coming out with unrealistically low rates, however competition for quality borrowers has seen several banks price very sharply for new business. We’re also witnessing a high rate of approval on commercial loans at the moment, so the banks are hungry and pricing well for good business loans.

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