At its second meeting for 2023, the Reserve Bank (RBA) Board decided on another increase in interest rates. Marking 10 rate rises at consecutive RBA Board meetings. The Board does not meet in January and the rate rises commenced in May 2022. On the first Tuesday in March, the central bank increased the official cash rate to 3.6%, an increase of 0.25%. The March decision follows a run of 0.25% increases and places Australia’s cash rate at the highest it has been for 11 years.
In making the 7 March announcement, the Reserve Bank once again confirmed that its priority was to ensure this period of high inflation was only temporary and would do what was required to reduce inflation to its target. Currently inflation sits at 7.4% and the RBA target range is between 2% and 3%.
The March decision was highly anticipated and it was clearly stated by the RBA in previous announcements that further increases would be expected to be required. This was again repeated in the Mach statement. But, in a speech to a business summit, Dr Philip Lowe, the Reserve Bank Governor, revealed that a pause may also be on the agenda.
The Governor revealed that discussions were held by the Board members around getting closer to the point of pausing rate increases. No specific timing on this was indicated but the further details on exactly what options were discussed by Board members at that meeting will be revealed in the meeting minutes in a few weeks.
Until that time, boat buyers planning purchases with marine finance may find the content of the March monetary policy decision statement and Dr Lowe’s speech helpful and insightful.
Interest Rates Decision Statement
The Monetary Policy Decision statement issued to announce the latest rate decision includes the following points:-
- Cash rate increased by 25 basis points (0.25%) to 3.6%.
- Moderation in global inflation but rates remain very high.
- The outlook for the global economic is subdued.
- Australia’s inflation rate seems to have reached the peak in the December Quarter as CPI indicates.
- Prices on goods are expected to ease in the months ahead as consumer demand eases off and because of developments which are expected in the global economy.
- Inflation in the services area is particularly high and attributed to the high demand for services over the holiday/summer season. Rent was singled out as seeing exceptionally high inflationary pressures.
- Forecast is for the rate of inflation to fall in 2023. By mid-2025 inflation is expected to near 3%.
- Growth in the economy is expected to be lower in the next few years.
- Positive outlook for business investment but housing construction area is seeing a softening.
- Tight conditions in the labour market continue. Unemployment rate is at 50-year lowest. The increase reported in January figures reflects seasonal impacts.
- The Board sees a ‘lower risk’ that a spiral of prices wages will occur as wage growth pick-up continues. However, the Reserve Bank is still acutely aware that this could emerge and is continuing to closely watch the pricing behaviour of firms in relation to costs of labour.
- Uncertainty was a major theme in the Minutes of the February meeting and uncertainty was also mentioned on March. This, in regard to the speed at which and when consumer spending will ease off in response to the rapid interest rates as is being seen in other countries. It is not known when this will translate to the Australian economy.
- The priority of the Reserve Bank remains to achieve target inflation.
- More interest rates increases are expected in coming months.
Governor Philip Lowe – Speech
Greater detail was gleaned from Dr Lowe’s speech at the AFR Business Summit on the morning of Wednesday 8 March. The complete speech is available for perusal on the Reserve Bank website for those who are interested in the full detail.
Dr Lowe said that ensuring the current period of high inflation is only temporary is the major challenge for the nation. He said if it does persist, then even higher rates and much greater unemployment rates would be needed to address the situation. According to Dr Lowe, the Reserve Bank is committed to doing what is needed to ensure this does not happen. Interest rates, he said, were the tool that the central bank had in order to achieve the fall in inflation.
An interesting remark which was reported by numerous media outlets was in regard to the discussions about possible pausing of this run of increases. Dr Lowe said there were discussions that the rate was in what he described as ‘restrictive territory’. He went on to say that conditions were now closer to when it would be seen as appropriate to hold rates. When these conditions or point is reached will be based on an assessment of the available data and outlooks.
Boat Finance Interest Rates
The March RBA rate decision highlights the benefits to boat buyers requiring marine finance of engaging Jade Boat Loans to secure them cheaper interest rates. While rates in the marine finance sector will trend in line with Reserve Bank decisions, that trend is far from uniform. Access to more lenders enables our consultants to source the cheapest marine finance rates available at any particular time with finance specifically negotiated and matched to customer requirements.
We’ve now seen 10 rate rises from the Reserve Bank and there are strong indications we will see number 11 and possibly a 12th in coming months. Buyers would be wise to secure new boat purchases with secured boat finance prior to more increases.
To secure cheaper interest rates on 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.