Interest rate to keep the economy rolling
THE 2.5% cash rate will remain in place and according to RBA Governor Glenn Stevens this is the best fit for our economy for time being.
This year cash will earn around 1% over inflation. For those looking at wealth building, the low rates are an opportunity. Low interest rates mean a reduced cost of capital allowing accelerated debt reduction and increased equity and wealth.
The increased competition amongst lenders is a win-win for those seeking a new mortgage. The difference can be at least 1%. The "comparison rate" shows the true cost of a loan.
The effect of the low interest rates was summed up by the RBA statement this week: "Growth is thought likely to strengthen a little in 2014, though to a pace that is still a little below trend. It is then expected to pick up further to an above-trend pace by 2015/16."
The RBA said this was primarily because of the lower Australian dollar that is expected to boost exports and restrain imports. Economic growth for 2014 will continue to be restrained by the fall in mining investment and the state and federal governments' fiscal policies. Low interest rates should also stimulate prices and turnover in the housing market.