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A new approach to debt? Interest rate cuts have subdued effect

A new approach to debt? Interest rate cuts have subdued effect
Date of Publication: Wednesday, 27 June 2012 13:27

The impact of the interest rate fall has been considerably weaker than expected while confidence is so shallow, mortgage directors have said.

 

The central cash rate has fallen several times in the past nine months, including two consecutive cuts in the past two months, as the Reserve Bank attempts to insulate the Australian economy from the wider financial crisis.

 

However, home loan lending has only risen modestly in proportion, reported the mortgage directors of Adelaide Bank and Commonwealth Bank.

 

The suppression in housing market activity has seen house prices falling across Australian capital cities, but this has not yet enticed consumers to react with home purchases.

 

And there are concerns that expansionary monetary policy is not able to rouse Aussies from their new steadfastly cautious approach.

 

Assistant governor of the Reserve Bank, Dr Guy Debelle, said that consumers are currently more concerned with using the lower interest rates to pay off their debts, which is not destructive in itself.

 

He spoke, however, of his concerns about the escalating Eurozone crisis. "Nobody knows how it will play out", he said.

 

Bret Clement

Wednesday, 27 June 2012 13:27
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