Interest Rates, What Do They Mean For Us ?

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Interest rates – They’re unavoidable when it comes to getting a loan, but knowledge is power… If you are aware of what interest rates mean then you can take advantage of them. Read on to find out more…

What’s happening at the moment?

After reaching a record low of just 1.5% in August this year, the reserve bank has remained faithful that the cash rate will act as a catalyst for economic growth. Glen Stevens, the governor of the RBA stated that “overall growth is continuing at a moderate pace, despite a very large decline in business investment”. So, the economy is functioning at a
“moderate pace” but business investment is low. It seems that current economic growth has therefore been offset against consumer consumption. I mean there are many factors to which the Australian economy relies on for growth. One of those factors is business investment. But a recent decline in investment must be met with an increase in both consumer and government expenditure for the economy to operate at a “moderate pace”. Now the Australian budget for the 2016-2017 financial year was recorded at -2.2% of GDP, 0.2% improvement from the 2015-2016 budget outcome of -2.4% of GDP. The trend, a decrease in government expenditure. Therefore, one could come to terms with the fact that the government is becoming more interdependent on consumers to fund economic growth. At a time where the cash rate is just 1.5% the risk in today’s financial markets is low. Inflation is currently subdued at 1.3% – which is well below the RBA’s target of 2-3% – prices are flat across the economy. I honestly wouldn’t be surprised if I saw a half of Australia’s banking sector at Bondi Beach.

Act now or Act later?

My suggestion, get busy spending. Refinance your loan, seek personal loans, many brokers will help in providing short term loans. If you have debt that needs to be consolidated, do it now. Of course, you can wait, and even then I wouldn’t suggest you refrain. Franklin Templeton – which had $733 billion of assets under management at the end of September –  is betting that the RBA will cut the cash rate two more times, indicating a positive direction for consumers who wish to borrow by mid-2017. But like the missus, the future is an unpredictable game, where the odds are skewed. Either way, saving is a non-viable option and many Australians have recognized this trend with the Australian Household Savings Rate declining from 8.8% in the July quarter of 2015 to 8% in the July quarter of 2016. Today is a period which is conducive of wealth building, the economic conditions are right for it. So get started, I know I have.

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