The Reserve Bank says its twin cash rate cuts have helped support the economy by lowering borrowing costs for businesses and consumers, most notably for new mortgage customers.
Assistant governor Christopher Kent says RBA data shows the average outstanding variable-rate housing loan fell by 23 basis points in June and was likely to fall by a similar amount in July, suggesting lenders have passed on the bulk of the central bank’s two 25 basis point cuts.
Dr Kent told an audience in Sydney that reducing the cash rate to a record low 1.0 per cent had also helped support the economy by weakening the Australian dollar, which last week hit a 10-year low of 66.77 US cents.
Additionally, yields across the bond curve have dropped to all-time lows after RBA governor Philip Lowe said the cash rate would remain low for some time, and indicated further cuts could be an option.
“The transmission of monetary policy in Australia to financial conditions is working in the usual way,” Dr Kent said on Tuesday.
“That broad-based easing in financial conditions in Australia will provide some additional support to demand in the period ahead.”
Dr Kent said new mortgage customers and those refinancing have particularly benefited from a lower cash rate thanks to discounting to attract new borrowers.
He said the RBA expects new loan approvals to build on June’s increase if property market conditions continue to improve, with clearance rates having risen and prices showing signs of having bottomed.