Economists ‘not surprised’ with unchanged cash rate, poll reveals

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The Reserve Bank of Australia has decided to keep the cash rate on hold, a move that surprised no one, including leading experts and economists.
 
A poll by comparison website finder.com.au revealed that all 33 industry experts and economists predicted the hold on Australia’s cash rate, with 38% saying the central bank will make the move by the end of the year instead. Should this prediction of another 0.25% cut push through, Australia would see a new record low of 1.75%.
 
Almost half of the surveyed experts were expecting a cut this August or September.
 
Michelle Hutchison, Money Expert at finder.com.au, said that borrowers shouldn’t be concerned with a rate cut. Customers should instead focus on being prepared for rising rates, she said.
 
“While borrowers with a variable rate home loan shouldn’t hold their breath for lenders to pass on a full cash rate cut if the Reserve Bank drops the cash rate again, this is the least of their worries compared to expected rising interest rates,” she said.
 
“It’s clear that interest rates will be on the way up, so borrowers need to make sure they are prepared by reviewing their budgets and working out if they can afford higher costs. For instance, for every 0.25 percentage points increase to a $300,000 home loan, it will cost about $50 more in repayments per month.”
 
Hutchison added that the majority of experts (56 % or 18 experts) are forecasting the cash rate will start rising in 2016. Another 13 experts predict a rise after 2016.The average forecast for when the cash rate will rise is the last quarter of 2016, she said.
 

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