Discussing interest rates can be boring - unless they affect you. And they do affect most borrowers, especially home buyers. They also affect everyone with savings in the bank.
The Reserve Bank cut interest rates last week and some analysts expect more reductions to come.
The July cut was predicted by a vast majority of economic commentators, but not all of them.
Some think it was too soon, believing the RBA should have waited longer to observe the effects of the June rate cut before moving again.
They argue Australia's economic progress is still sound. Our economy grew 1.8 per cent in the year to March, satisfactory but not strong.
Perhaps a slower period of growth lies ahead.
New building approvals declined in May, the drought is holding exports and rural areas back; all reason to cut further.
However retail sales grew a sound 2.4 per cent in the year to May. The mining sector is booming with record volumes being shipped. They will increase if the US - China trade war is resolved.
Low rates also usually cause inflation to rise but that hasn't happened in recent years. Many economists are wondering why.Russell Tym
We have monthly surpluses on international trade, consumer sentiment is sound and job vacancies are edging up.
The Reserve Bank aims to achieve steady economic progress in Australia. It must do this while keeping inflation low and employment high.
Inflation is currently very low at 1.3 per cent and unemployment higher than desirable at 5.2 per cent.
There appears no risk of inflation accelerating in the near term so the RBA can afford to cut rates in an effort to boost jobs.
That seems to be what it has decided to do. Let's hope it works.
One concern though is that the RBA now has little ammunition left if it is needed in a future recession. Very low rates are stimulatory for the economy.
Consumers are more likely to spend when borrowing costs are low and businesses are more likely to expand and employ more staff when finance is cheap.
Low rates also usually cause inflation to rise but that hasn't happened in recent years. Many economists are wondering why.
Fund manager Platinum points out that short term interest rates were below one per cent for 13 years after the Great Depression and didn't get back above 2 per cent for 22 years.
Inflation also remained low. Perhaps we will have low rates for quite a while yet.
It is certainly a good time to borrow to buy any good quality asset at a reasonable price.
Financing the purchase of a home, business, farm, commercial property or any appreciating asset could be very profitable long term.
So could borrowing to expand a successful business.
There appears little risk of high interest rates causing repayment problems for the next several years at least.
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