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Before the Reserve Bank of Australia met on Tuesday, the AFR reported that coronavirus’ economic effects increased the chances of an official interest rate cut. Although the rate cut was unlikely to improve the construction industry’s supply chains, it was thought that the extra working capital resulting from the cut would help businesses survive a temporary slump caused by delays in supply of materials. (Coronavirus lifts chances of RBA rate cute – Matthew Cranston, 28/02/20) As predicted, the RBA cut official interest rates to a record low of 0.5%. The AFR reported that by cutting rates, the Board was trying to support the Australian economy during the global coronavirus outbreak. The big four banks immediately passed the full official rate cut to borrowers. (RBA cuts rates to record 0.5pc – Matthew Cranston, 03/03/20) The Australian reported that developers welcomed the rate cut, following slow building and construction rates in January and hampered projects due to the supply chain delays. HIA believes that despite increasing residential prices and listings, slowing economic growth is triggering uncertainty amongst consumers. The cut will ideally encourage consumers to see that rates will remain low for the foreseeable future. (Housing developers cheers RBA rate cut – Ben Wilmot, 03/03/20) Philip Lowe, the Governor of the RBA, explained the reasoning behind the cut following the Board’s meeting. Read it on The Urban Developer: RBA Cuts as Coronavirus Clouds Outlook.
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