With lockdowns still in place in Sydney and Melbourne, the Reserve Bank of Australia (RBA) has decided to hold the official cash rate at a record low of 0.1 of a percentage point .

As a result of Sydney’s longest lockdown on record and Victoria’s considerable lift in COVID cases, the RBA’s prerequisites for a rate hike appear a long way off.

According to chief economist at CreditorWatch Harley Dale, it’s now clear that the RBA will stick to its intention to retain strong support for households and businesses. 

“Predictably, there is no plan to increase the official cash rate until 2024 and policies are being maintained to assist in keeping downward pressure on borrowing costs,” Mr Dale said.

“This environment will be very beneficial for businesses and households as they look towards the hopeful easing of lockdown restrictions in late October/early November.

“The highly stimulatory monetary policy climate will also be crucial in moving through the inevitable bumpiness and uncertainty of a post-lockdown economy.”

However, the rising threat of inflation could conceivably change the calculus, more quickly than many might expect.

Rick Maggi