Planning the purchase of a new caravan for travel or holidays doesn’t usually include a study of the current economic conditions and latest inflation and employment figures. But when caravan finance is required to make that purchase, caravan finance rates and the impacts on those rates need to be in the decision-making mix.
Economic data for employment and inflation are two of the main sets of data that the RBA considers when the Board is making its monthly decisions around cash rate rises. In the past week we posted an article on the latest unemployment figures and the potential impact of those figures on the RBA’s August rate decision. For those seeking to understand how these changes might affect finance caravans near me, it's essential to stay updated on these economic indicators.
This week, we have the latest inflation figures from the Australian Bureau of Statistics (ABS) to add into the mix. The ABS reports that inflation has hit 6.1% for the June quarter and that rate is expected to go higher, possibly close to 8% before the end of this year.
For those planning to take on finance for a new caravan, soaring inflation figures are unfortunately not the greatest news. Interest rates including caravan finance rates can be impacted by rising inflation as the RBA increases the cash rate to curb the upward trend. Having even a basic understanding of how economic conditions and interest rates are entwined, may assist caravan buyers to time their purchase and their finance application to ensure they secure the cheapest rated loan.
Australian Bureau of Statistics June Quarter Inflation Report
The ABS is the government body which collects, collates and reports on economic data including employment and inflation. On July 27 the ABS released the inflation data for the 3 month period ending 30 June. The data shows an increase in consumer price index inflation rate of 1.8% over the period. While this figure is less than the March quarter increase of 2.1% it was the just the second largest quarterly increase in around two decades.
Soaring inflation is being felt across the globe for some of the same reasons as we in Australia are experiencing. But there are also local issues which are contributing to rising food prices in particular.
Major points to note in the statement by the ABS include:-
- Rising global inflation as a result of the post-COVID era with easing of restrictions and increased demand while supply is constrained.
- The global oil price shock stemming largely from the war in Ukraine is contributing to global inflation together with ongoing issues with supply chains.
- 1% CPI inflation in Australia and 4.9% when the ABS excludes the large decreases and increases – a normal process in calculating and releasing inflation figures.
- ABS reports that 6.1% is the highest rate of inflation in Australia since 2003.
- Two major drivers are the price of fuel and construction costs in the housing sector.
- Increases in goods prices accounted for 79% of the inflation increase. Prices for services, as differentiated from goods, recorded lower price rises.
- Soaring prices for goods are being fuelled by the rising costs of freight and transportation and supply constraints. Supply is being impacted by ongoing COVID issues and tightness in the labour market. (Refer the article on employment figures.)
- The fallout from the floods primarily on the east coast in the early part of 2022 is impacting supply and prices for many food items.
When hearing the latest ABS inflation report, Federal Treasurer Jim Chalmers said the figures were not surprising but confronting. In a media release, Mr Chalmers said inflation would get worse before getting better.
The Treasurer is due to issue a Budget addressing these issues in October.
The Interest Rate – Inflation Connection
As mentioned in recent Board statements, soaring inflation is given as essentially the key reason for the RBA rises in the cash rate. Both the release of these inflation figures and the unemployment data come just weeks from the RBA Board’s next meeting on the cash rate.
Interest rates are increased by the RBA to essentially curb spending and as such stabilise and bring down inflationary price trends. After the Board’s early July meeting, Governor Lowe specifically mentioned the bank would be considering the upcoming data in deciding the scale and timing of further rate rises. The 40 year low unemployment figures and now the 20 year high inflation figures can be a certain that further rises in the cash rate will be announced in August and possibly several further months this year.
Exactly how much the rise will be is unknown. But leading economists are leaning towards a 0.5% rise in August. One of the Big 4, the ANZ, has come out last month with a forecast for up to a 2% increase in the cash rate in the coming months.
Effect on Caravan Finance Rates
The cash rate is a major influence on lending interest rates across all market sectors. The banks and non-bank lenders have the cash rate (a bank to bank lending rate) as their base and then set their own rates accordingly.
Some lenders have not been waiting for RBA decisions, but increasing rates in some of the lending markets ahead of the RBA Board meetings. In regard to caravan finance rates, as is seen from our Comparing Finance Rates chart interest rates vary significantly across the lender market. Click here for the best rate caravan finance to ensure you get the most competitive deal available.
It would be expected that based on the latest inflation and employment figures, the RBA will increase the cash rate a number of times in coming months. This would typically result in many of our lenders increasing their rates.
Options for Secure Caravan Financing
Securing caravan finance prior to one or any of these cash rate rises may result in achieving a cheaper interest rate loan. So move as quickly as possible with your Secured Caravan Loan application by contacting us for a quick quote and fast loan approval.
With our extensive lender accreditations, we remain in an ideal position to secure better fixed interest rate caravan loans from a wider choice of lenders.
Contact Jade Caravan Finance on 1300 000 003 to quickly secure your caravan finance prior to further rate rises.
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.