Banks will pass on as much relief to customers as they can should the Reserve Bank board cut its key interest rates on Tuesday as expected by economists, the peak industry body says.
But Australian Banking Association CEO Anna Bligh also points out that bank customers are not just borrowers.
“People with savings and deposit accounts … they are getting very, very low rates so banks will want to balance it all out,” she told ABC television on Monday.
Economists widely predict the RBA will cut the cash rate to 0.1 per cent from the already record low of 0.25 per cent, the first change since March.
The same reduction will go for its three-year bond yield target rate and its term funding facility rate for banks.
And in its increasingly complex monetary policy actions in an low interest rate environment, economists also expect the RBA to start buying five to 10 year bonds to further keep market interest rates and funding costs low.
RBA governor Philip Lowe appeared to lay the groundwork for a cut in a speech last month, saying as the economy opens up “it is reasonable to expect that further monetary easing would get more traction than was the case earlier”.
Last week, Dr Lowe’s deputy Guy Debelle indicated that the economy is now out of recession.
A series of reports on Monday backed this view with job advertising, home prices, building approvals, housing and construction loans and manufacturing all showing signs of improvement.
ANZ job ads – a pointer to future employment – rose by a further 9.4 per cent in October, but are still down 13.5 per cent from their February level and prior to the onslaught of the coronavirus pandemic.
ANZ senior economist Catherine Birch said the steady recovery has seen job ads regain more than three-quarters of the plunge recorded in April and May.
“We think job ads will need to exceed pre-pandemic levels for some time to ensure the ongoing recovery in employment,” she said.
Meanwhile, residential property values increased across the nation in October apart from locked-down Melbourne, with prices in Brisbane, Adelaide, Hobart and Canberra reaching record highs.
CoreLogic’s national home value index rose 0.4 per cent in October, ending five months of consistent declines.
Australian Bureau of Statistics figures showed demand for home loans among owner-occupiers rose six per cent in September.
In addition, the ABS said dwelling approvals jumped 15.4 per cent in September, with private sector houses rising 9.7 per cent and dwellings other than houses surging 23.4 per cent.
Housing Industry Association chief economist Tim Reardon said high volumes of sales, loans and approvals have coincided with the federal government’s HomeBuilder program.
“HomeBuilder was designed to provide consumers with confidence to return to the detached housing market,” he said.
“It has been very effective at achieving this goal.”
Meanwhile, Australia’s manufacturing sector has seen a marked improvement despite carrying the deadweight of Victoria’s coronavirus lockdown.
The Australian Industry Group’s manufacturing index increased by 9.6 points to 56.3 in October.
It is the first time since July the index has been above 50 points, indicating the sector is in expansion.
The surge was led by NSW, while respondents across all sectors noted a jump in sales and new orders as a result of pent-up demand from initial coronavirus restrictions.