Cash Rate

At its July meeting, the Reserve Bank of Australia reduced the official cash rate to an historic low of 1.00%. Bank bill swap rates are as follows:

30 day

60 day

90 day

180 day

BBSW

1.11%

1.10%

1.10%

1.16%

As anticipated, at its July meeting the Board of the Reserve Bank of Australia lowered the cash rate by 25 basis points to 1.00%. This follows a similar reduction at the Board's June meeting. This easing of monetary policy is aimed at supporting continued employment growth and assisting in driving inflation towards the medium-term target. All the big four Australian banks have passed on the majority of the two recent rate cuts to customers, however none has passed on the combined 0.5% in full. The expectations of the major banks are for a further reduction in the cash rate of 25 basis points predicted in late 2019 and possible a further 25 basis points reduction to 0.5% in the first quarter of 2020.

The RBA believes that greater participation in the labour market is a key factor keeping wages growth and inflation low. That in turn means unemployment has remained above 5% and wages growth has therefore only picked up very modestly. There is an expectation of wages growth in Melbourne and Sydney. RBA Governor Philip Lowe says the board is prepared to cut interest rates further if the economy does not grow fast enough. The seasonally adjusted unemployment rate remained steady in May at 5.2%.