On Tuesday 7 March the Reserve Bank (RBA) raised the cash rate by 0.25%. An increase in March had been expected by the markets and further interest rates rises had been stated as likely to be required by the RBA Board in previous months. The March decision made it 10 meetings straight that the Board has decided to increase the cash rate and it is now at 3.6%.
In the statement which announced the Board’s decision, the determination of the Board to reduce inflation down to its target was reaffirmed. Inflation as at January data issued by the Australian Bureau of Statistics (ABS) is 7.4%, down 1% on the December figures. To put that figure in perspective for what the RBA is working to achieve, their target is in the range of 2-3%.
According to the RBA, further interest rate increases are expected to be required to achieve the target and also to make sure that this period of high inflationary pressures is only temporary. That may be interpreted as the central bank signalling another increase in April. But comments were then made by the Governor of the Reserve Bank, Philip Lowe following the March meeting, that a pause in the increases could be getting close.
For caravan buyers with plans to make their purchase with caravan finance, consumer finance interest rates usually trend in line with RBA decisions. With an expectation that caravan finance interest rates will rise following the latest RBA decision, buyers can source cheaper loans with Jade Caravan Finance.
To assist buyers considering finance to obtain a fuller understanding of the reasoning behind the RBA’s latest increase and its outlook, we have provided a summary of the March Monetary Policy release and a speech delivered by Dr Lowe on 8 March.
Monetary Policy Statement - March
The RBA Monetary Policy Statement for March 2023 can be read in full at the Reserve Bank website.
Some of the key comments in the statement are:-
- 25 basis points increase to the cash rate. Lifting the rate from 3.35% to 3.6%.
- Though moderating, global inflation is still at very high rates.
- Subdued forecast for the global economy.
- Inflation rate in Australia peaked in December. Expectation for the prices for goods to moderate as a result of demand domestically weakening and global conditions.
- Due to the strong demand seen in certain sectors on seasonal basis, inflation in services prices is still very high. The Board specifically noted price of rentals.
- The Board forecasts that inflation will decline this year. The 3% rate is forecast to be reached in 2025.
- Below trend economic growth in Australia is expected in the years ahead.
- The Board is acutely aware of the possibility that a prices-wages spiral could emerge in Australia, but sees it at a lower risk, despite the wages growth.
- The Board sees uncertainty in the when and by how much Australia will see a slowdown in spending as a respond to the rapid rise in interest rates globally is showing in the global economy.
- The expectation is that further monetary policy tightening, that is, more rate increases, will be required.
Comments by Dr Philip Lowe
While the monetary policy statements are traditionally quite brief and more detail on Board discussions won’t be available until the release of the minutes, Dr Lowe provided valuable insights the day after the March decision. Dr Lowe delivered the keynote address at the AFR Business Summit and covered the economy, inflation and monetary policy.
While some may be interested in reading the full speech transcript, we have extracted a few key comments that relate to interest rates.
- Australia must ensure that the current inflation period is only temporary. Higher rates and unemployment would be experienced if high rates of inflation do persist.
- Reserve Bank is committed to doing what is needed to ensure inflation is only temporary. Dr Lowe highlighted that the tool the Reserve Bank has at its disposal to achieve this is – interest rates.
- While high inflation is a negative legacy from the COVID-19 pandemic as well as Russia invading Ukraine, the positive outcome is lower unemployment in Australia.
- In determining the cash rate decision each month, Dr Lowe explained that the Reserve Bank Board manages the dual risks of moving too quickly and of not doing enough.
- The Board now considers interest rates are in ‘restrictive territory’. Dr Lowe said that conditions were now closer to being appropriate to announce a pause in interest rates increases.
Caravan Finance Interest Rates – Considerations
Banks and non-bank lenders in the caravan finance market will typically lift their rates following the Reserve Bank decisions. But variations across the market will continue to be seen and Jade will continue to offer cheaper rates on finance for all types of caravans.
Prior to purchasing, buyers can familiarise themselves with how new caravan prices may translate to estimated loan repayments at the latest rates, using our finance calculator.
For cheaper interest rates on caravan finance, contact Jade Caravan Finance 1300 000 003
DISCLAIMER: THE DETAILS AND INFORMATION IN THIS CONTENT ARE PREPARED AND PRESENTED PURELY FOR INFORMATION AND NOT INTENDED IN ANY WAY AS THE SOLE SOURCE OF FINANCIAL ADVICE FOR CARAVAN PURCHASING. IF ADDITIONAL FINANCIAL ADVICE IS REQUIRED, READERS SHOULD REFER TO A FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY ERRORS, PRODUCT DESCRIPTION VARIATIONS, OR OTHER MISREPRESENTATIONS OF INFORMATION AS PRESENTED.