Reserve Bank of Australia Lifts Interest Rates for 10th Consecutive Time, Jade Offers Competitive Rates Despite Increases
As was expected, the Board of the Reserve Bank of Australia (RBA) lifted the cash rate at its 7 March meeting by a further 0.25%. This is now 10 rate increases in a row and takes the cash rate to 3.6%, the highest level for interest rates in 11 years. In announcing the rate rise, the Board reaffirmed its determination in returning the current high rate of inflation at 7.4% back to the target of 2-3%. The Board also repeated previous comments about further increases being needed to achieve this objective and ensure that this current high inflation period is temporary.
For buyers planning new car purchases with motor vehicle finance, the expectation is for interest rates in general to increase. Banks and non-bank lenders typically increase their own rates following these announcements. But the amount and timing of such increases and in which particular loan markets, does vary. The latest RBA interest rates rise further underscores the value of using the services of Jade to source the cheapest loans from more than 60 lenders.
While further rises, or at least possibly one more, look imminent, there are some positive indications noted by the RBA Board which may indicate an easing in rate hikes in coming months. This was included in comments by the RBA Governor Philip Lowe in a keynote address delivered to the AFR Business Summit the day after the rate announcement. In that speech, Dr Lowe said that the Board was closer to when it would be appropriate to pause increases and that the Board had discussed the possibility of holding rates at a future meeting.
Reviewing the RBA’s monthly statement and Dr Lowe’s speech provides information and insights into the rationale behind the monthly decision and the Board’s outlook.
RBA Board March Statement
The key points in the RBA Board media release of 7 March include:-
- Increase of 0.25% to the cash rate. Increased to 3.6%.
- Global inflation moderating but remains extremely high.
- Global economic outlook subdued.
- As indicated by the CPI, inflation appears to have peaked domestically and is goods prices are expected to moderate in coming months. This is seen as due to softer domestic demand and developments globally.
- Services inflation is high due to strong demand in some areas over summer. Rents especially.
- Forecast is for inflation to decline in 2023 and reach around 3% by mid-2025.
- Growth expected to be below trend over coming years.
- Softening in housing construction but business investment outlook positive.
- Labour market tightness continuing with unemployment near a 50 year low. Increase in unemployment in January partly reflecting seasonal trends.
- Pick-up in wages growth but a lower risk of prices-wages spiral occurring. But the Board remains alert to the possibility of such a spiral and continues to pay attention closely to how labour costs and business price setting evolves.
- Full effect of recent interest rates increases still to be felt in regard to mortgages.
- Uncertainty around the extent and the timing of spending slowdown and the response to rapid rate rises globally on the global economy.
- Priority of the Board remains to return inflation to the 2-3% target.
- Further tightening of monetary policy (interest rates rises) is expected to be needed.
Dr Lowe Speech – Key Points
Dr Lowe delivered a speech on 8 March which elaborated on many of the points discussed at the Board meeting. The full speech may be of interest and can be read at the RBA website.
Some of the relevant points in regard to interest rates include:-
- Number one challenge for Australia is to ensure current high inflation is temporary. If high inflation persists, higher interest rates and higher unemployment would be required.
- RBA will do what is required to ensure high inflation rate does not become entrenched. Interest rates is the tool RBA has to do this.
- High rate of inflation a legacy of pandemic and invasion of Ukraine. A positive legacy of these is the improvement in employment.
- Inflation expected to fall in 2023 and 2024 but uncertainty around the specific path.
- Board managing dual risks in making monthly decision – not doing sufficient and moving too fast.
- At 7 March meeting, Board discuss that rates were now in ‘restrictive territory’. Closer now to where it would be appropriate to pause increases in rates to allow for time to assess the economy’s situation. That ‘point’ will be determined by data and assessing the outlook.
Impacts for Motor Vehicle Finance Interest Rates
While a pause in rates may be in the sights of the RBA Board, the March increase will potentially result in interest rate rises in most, if not all, lending markets, including motor vehicle finance. As mentioned above, lenders make their individual decisions on these matters, and that creates variation in car financing interest rates across the sector. This can also affect car loans for ABN holders, so it's important to research and compare rates from different lenders to find the best option for your business.
We assist buyers in sourcing the cheapest rates currently available with loans best suited to their requirements. We achieve this through our industry-level contacts and accreditations with multiple lenders. Saving buyers valuable time and hassle in securing Cheap Business Car Finance.
In addition, we may assist customers to offset rate rises by strategically structuring finance to achieve target repayments and/or optimise tax benefits for business buyers.
Impact of Reserve Bank of Australia Interest Rate Increases on Motor Vehicle Finance
The potential increase in interest rates resulting from the RBA's March decision may also impact the availability and rates of secured loans against cars. Lenders may adjust their rates and lending criteria, so it's important to stay informed and compare options to find the best deal. At Jade, we have accreditations with over 60 lenders and can assist buyers in securing the cheapest loans best suited to their needs, including secured loans against car. We can also help structure finance to offset rate rises and optimize tax benefits for business buyers.
Contact Jade Car Loans 1300 000 003 for cheaper interest rates on motor vehicle finance.
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