The Federal Government has been a lot more prominent in the lives of most Australians over the past two years of the pandemic. The daily press conferences, rollout of stimulus packages and other announcements and policies have impacted many areas of life. For boat owners, some of the restrictions introduced had a direct effect on when and how recreational vessels could be used.
So it’s not surprising that some people may be wondering what impacts the result of the recent Federal Election may have on boating, especially marine finance and boat loan interest rates. The result has triggered a change of government. To assist in understanding the situation, we address several key aspects of the connection between the government of the day, boat loans and interest rates. It can be complex but in some ways, also quite simple.
- Boat owners with existing marine finance will not have their loans impacted by any change in government.
- The range of boat loans available – Secured Boat Financing and Unsecured Personal Loans, remain completely unchanged.
- Election results do not automatically cause changes in interest rates. But government policy which then results in changes to economic conditions including inflation and unemployment can, in the long term, be the reason for the RBA to make changes to the cash rate.
- The cash rate that affects lending rates is set by the Reserve Bank of Australia, not the Government or a government department.
Establishing Interest Rates
The Reserve Bank of Australia, RBA, is Australia’s central bank and establishes monetary policy. Monetary policy includes setting the cash rate which is essentially a base rate from which banks and lenders establish their lending rates.
The RBA is completely independent. It is not directed by the government of the day. But, as noted above, it does act based on economic conditions which can be created or affected by the policies introduced by a government through fiscal policy.
Economic conditions are also impacted by global issues. This is particularly evident with ongoing issues from the pandemic, supply delays, the war in Ukraine and other events. These have been noted by the RBA in recent Board meeting statements.
The RBA makes its decisions around monetary policy and the official cash rate at its monthly Board meetings. The Board monitors domestic economic indicators of inflation, unemployment and currently, wage growth and global issues that may impact the Australian economy.
The Board then decides whether to hold, increase or cut the cash rate to support the Australian economy in achieving its targets. During the pandemic, the RBA cut the cash rate to historically low levels to stimulate the local economy.
With the economy now recovering from the economic effects of the pandemic, the RBA has commenced a process of normalising interest rates as unemployment has fallen to the lowest level in decades and inflation surges.
An indication of the central bank’s independence may have been highlighted with the decision to lift the cash rate at the May meeting which was mid-election campaign.
Policy Effect on Rates
The key measures that the RBA analyses regarding making changes to interest rates are unemployment and inflation. Also currently of concern is the sluggish wage growth. Governments may implement policies that directly target these issues.
Where government policies say to drive down unemployment which could be perceived as a recent experience, this of course may influence RBA decisions. So there is a connection but not a direct link between decisions made by the RBA and the government.
Boat Loan Rate Outlook
As far as the current situation with the change of government, it should be noted that it can take some time for new policies to be passed through legislation, enacted and then have an effect. The RBA has indicated that it expects to make further increases in the cash rate. This could be at the upcoming June meeting.
Lenders across lending sectors respond to rate increases by the RBA by lifting their rates. Future rises may increase boat loan interest rates. This looks set to occur regardless of any change of tack by the incoming Federal Government.
The RBA rate rise in May comes from a record low level. So lending rates remain extremely accommodative including in marine finance. Jade Boat Loans continues to source the cheapest interest rates from across the marine finance sector.
On a final note, banks and lenders will advertise their best interest rates on boat loans. This is the rate applicable to loan applicants with a good credit profile and for new vessels. Those planning to apply for a boat loan may increase their prospects of our consultant being able to secure the lowest rate by addressing any issues with their credit profile.
Contact Jade Boat Loans on 1300 000 003 to apply for a cheap interest rate boat loan
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 MIS-PRESENTED DATA AND DETAILS HEREIN.