The RBA’s recent cut will save a mortgagee with a typical 30-year, $300,000 home loan about $170 in monthly repayments if the lender passes on the full amount. Over the life of the loan, the savings will total about $61,272.
”There was a significant deterioration in world economic conditions late in 2008,” said RBA Governor Glenn Stevens in a statement accompanying the cut. ”The effects on household and business confidence of the financial turmoil following Lehman’s collapse, and continuing strains on major financial institutions, saw a significant downturn in demand around the world.”
The RBA has now lopped four full percentage points off its cash rate since it changed tack and began cutting rates last September. The cash rate has not been this low since 1960, according to Bloomberg data.
The rate reduction comes hours after the Federal Government announced a $42 billion stimulus plan aimed at keeping the economy out of a recession. The spending includes some $12.7 billion in cash payments and $28 billion on new infrastructure projects including roads and schools.
“What they have done is certainly enough, put together with the fiscal package,” said Michael Blythe, chief economist for the Commonwealth Bank. ”Policy setting in Australia is very stimulative, although we are quite likely to see rates lower” in the first half of 2009.”
