The Reserve Bank of Australia (RBA) will be meeting early next month to make its next decision regarding the official cash rate. Since the last change in December 2012, the board have decided to leave the rate unchanged at three per cent.

Effects from the cash rate slashes last year have been seen throughout the last few months, as housing affordability rates have improved, along with the Australian Bureau of Statistics reporting an increase in retail turnover of 1.3 per cent.

However, the Australian Retailers Association (ARA) has called for the RBA to make further cuts to the cash rate in order to stimulate more buyer activity in the retail sector.

“Borrowers now know they’ve been paying inflated interest on their finance for far too long compared to overseas, and banks should look to bring rates down to acceptable levels independently of any rate decision made by the RBA,” said ARA executive director Russell Zimmerman.

“To address a compromised economic situation, the RBA needs to cut official rates to 2.5 per cent to get variable mortgage rates to a level of six per cent.”

If May’s decision resulted in a cash rate cut and finance lenders passed the cut onto mortgagees, then it would take some pressure from households. It may even allow households to feel as though they could spend more on retailing in Australia after paying lower repayments for mortgages.

The latest Consumer Price Index (CPI) for the March 2013 quarter showed that inflation rose by 0.4 per cent, bringing the level well within the RBA’s target of two to three per cent. This was the second increase in a row, with results from the December quarter showing a 0.2 per cent rise.

Author Pippa Kulmar

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