RBA leaves interest rates on hold at record low
The Reserve Bank has held official interest rates steady at a record low while expressing concern about the economic fallout from the stage four lockdown of Melbourne.
Following its regular monthly meeting on Tuesday, the bank held the cash rate at 0.25 per cent, where it has been since late March.
RBA governor Philip Lowe.Credit:Louie Douvis
RBA governor Philip Lowe said the Australian economy was going through a difficult period, however, the downturn was not as severe as earlier expected and a recovery was underway in most of Australia.
"This recovery is, however, likely to be both uneven and bumpy, with the coronavirus outbreak in Victoria having a major effect on the Victorian economy," he said in a statement.
Markets had expected the RBA to hold rates, with the bank signalling it would not start lifting them until inflation approached its 2-3 per cent target range and the jobs market was strengthening.
Inflation data last week showed the largest fall in consumer prices since September 1931. Unemployment rose in June to 7.4 per cent, with Treasury expecting it to reach 9.25 per cent by year's end.
CreditorWatch chief executive Patrick Coghlan said the decision recognised the balancing act facing the economy.
"However, there is concern that by extending the likes of the government's business stimulus packages, we are simply kicking the can down the road," he said.
"Once the likes of JobKeeper, JobSeeker, mortgage holidays and [bankruptcy] safe harbour do eventually come to an end, there will be a seismic shock to the economy as companies will have to either fend for themselves or admit defeat."
The decision came after the Australian Prudential Regulation Authority revealed 10 per cent of loans held by the nation's banks and credit unions were in temporary deferral.
As of the end of June, $274 billion in loans had been effectively suspended because of the pandemic and its impact on the ability of borrowers to repay their loans, APRA said.
Of housing loans, about 11 per cent, or $195 billion, were in deferral. But the rate was much higher among loans to small businesses, with $55 billion, or 17 per cent of those in deferral.
The authority noted that between May and June, the value of loans that moved out of deferral had increased to $18 billion, from $2 billion.
More to come