In what was a highly anticipated and generally expected decision, the RBA lifted the cash rate yet again at its August meeting. The RBA rate rise comes on the back of the release of data for unemployment and rate of inflation by the Australian Bureau of Statistics a few weeks earlier. The data with its significant drop in unemployment and rise in inflation, provided strong indications that a further RBA rate rise was imminent and required.
The RBA rate rise for August means boat loan rate increases, highlighting how using a broker such as Jade Boat Loans can secure the cheapest rated loans. That small 0.5% RBA rate rise can translate to a higher increase in boat loan interest rates, depending on the lender. This can mean quite a hike in repayments and the total amount of interest paid over the loan term. Securing that cheaper rate may mean the difference between the boat you can afford and the boat of your dreams.
To put the situation in perspective, we provide this explainer of the August RBA rate rise decision with the Board’s outlook moving forward.
Statement by RBA Board: August 2022
At its monthly meeting on the first Tuesday in August, the RBA Board made the decision to raise the official cash rate by 0.5%. This followed 0.5% increases in June and July and a 0.25% rise in May. Overall lifting the cash rate from its record low of 0.1% to the current 1.85% in just four months.
The announcement was is normal, was delivered via an official statement by RBA Governor Philip Lowe.
Notable inclusions in the statement:-
- The priority for the RBA Board remains returning Australia’s inflation rate to the 2-3% target level over time.
- While pursuing this target, the Board is looking to maintain the economy on what it describes as an even keel.
- It is noted that a narrow pathway presents to achieve this level of balance.
- One major area of uncertainty is with global conditions and issues.
- Overall outlook for growth globally by the IMF, was recently downgraded. This is attributed to high levels of global inflation, countries tightening their monetary policy, the invasion by Russia of Ukraine and the measures adopted by China in addressing the recent new outbreak of COVID-19.
- Inflation in Australia is 6.1%. The highest rate recorded since the early part of the 1990s.
- Domestic as well as global factors are seen as contributors to Australia’s rising rate of inflation.
- Prices are being pressured by the strong level of demand. While at the same time the low unemployment rate is evidence of a tight market for labour for business. The labour situation plus other factors are limiting the supply chain as businesses operate under constrained conditions for optimum capacity.
- On a domestic level, prices of especially fresh produce are experiencing the ongoing fall-out from the floods earlier in the year.
- The RBA’s outlook for inflation is: 7.75% in late 2022, just over 4% 2023, around 3% by 2024.
- Forecasts for economic growth, GDP, are in 2022 3.25%, 2023 1.75%.
- Additional falls in the current 3.5% level of unemployment are expected.
- Another area of uncertainty is with the behaviour of households in regard to spending levels. The level of consumer confidence has fallen and prices and inflation are pressuring budgets for many households.
- But with high employment, jobs are clearly being obtained and additional hours of work acquired.
Moving forward, the Board will be closely watching how the above issues and incoming data develop when it assesses future decisions around changes to monetary policy settings. That is in regard to additional rate rises. The August decision is framed as another stage in normalising the settings. As mentioned in earlier months, the RBA does not see the continued need for the settings of low interest rates which were required to support the economy during the pandemic.
Further rate rises are seen as expected. The specific timing of these and the size of the increases will be determined by the incoming data. The RBA Board next meets re interest rates on the first Tuesday in September.
Reaction from Economists and Analysts
As is usual following RBA announcements, quite a number of analysts and economists, including from the major banks, have issued their reactions and outlooks. Some are expecting the RBA to lift the cash rate as high as 2.6% by late in 2022 and some predicting 3.2% will be reached early in 2023.
However, some say that the slowing down of economic growth caused by the inflationary pressure may signal the need for the RBA to actually cut rates at some stage in 2023.
Boat Finance Outcomes
As is usual after a rate rise by the RBA, the lending market will react with increases across the lending sector. Individual lenders make decisions based on their own determinations and increases, as do rates, will vary across the market.
Boat owners with current loans that have a fixed interest rate should not be impacted by the recent decisions. Loans with variable interest rates may be increased as a result of the August decision.
Across our marine finance portfolio it is expected that many of our lenders will increase rates. Our rate comparison chart is updated and our latest rates compared with other lenders can be reviewed.
In a rising rate market the significance of achieving the cheapest interest rate boat loan is magnified. The difference in a slightly lower rate can be significant in the monthly repayments as you can estimate with our Boat Loan Calculator.
Engaging Jade Boat Loans to source and negotiate your boat loan can be a great strategy to ensure you secure the cheapest interest rate possible to suit your application and requirements.
For cheaper interest rate marine finance contact Jade Boat Loans on 1300 000 003
DISCLAIMER: THE INFORMATION AND SPECIFIC DETAILS CONTAINED IN THE CONTENT OF THIS ARTICLE HAVE BEEN PREPARED AND ARE PRESENTED PURELY AS GENERAL INFORMATION AND NOT INTENDED AS THE ONLY SOURCE OF FINANCIAL ADVICE FOR BOAT BUYERS AND LOAN BORROWERS. FOR THOSE THAT CONSIDER THEY REQUIRE SPECIFIC ADVICE, THEY SHOULD CONSULT WITH A FINANCIAL ADVISOR. LIABILITY IS NOT ACCEPTED IN REGARD TO ERRORS AND MISPRESENTED DATA AND DETAILS HEREIN.
