July is the third month this year for a Reserve Bank rate increase with the Board acting at their 5 July meeting to hike the cash rate by another 0.5%. The cash rate has now increased from that record low of 0.1% that was in place as a stimulus measure for more than 20 months to 1.35%. For those considering a caravan purchase, no deposit caravan finance options might become more appealing in light of these changes. Heeding the statements in the announcement, further Reserve Bank rate increases will be made by the Board.
The decisions by the RBA to lift the cash rate are in response to the surging rate of inflation which the Australian economy is experiencing. A situation that consumers are experiencing with rising prices across many goods and services.
Currently, inflation sits at 5.1% but the Reserve Bank is expecting that rate to increase further to possibly 7% during this year. While there have been increases in May, June and July, these moves by the RBA in changing monetary policy take time to take effect on inflation. Data on the CPI rates will be released in the coming weeks and these figures will provide the Reserve Bank with information when forming their August rate decision.
Reserve Bank rate increases in the cash rate have an effect across banks and lenders including those operating in the leisure market offering caravan finance. Buyers considering purchasing a new RV with finance at some time down the track may benefit from understanding how the Reserve Bank decisions affect caravan finance interest rates and why these increases are occurring,
The Reserve Bank announcements are made via an official statement by the Governor and provide the Board’s outlook and forecast for future rate increases. Important information which can act as a guide for caravan buyers as to the timing of their purchase and significantly, their loan application.
5 July 2022 Reserve Bank Statement
The rationale behind the July rate increase is provided in the statement issued by Governor Philip Lowe. The full Board meeting minutes are released at a later date and can provide even more detailed information.
The key points in this July statement include:-
- Inflation in Australia is being impacted by global issues.
- Global supply chain issues, many as a result of the COVID-19 pandemic which is persisting in many countries is a contributor to domestic inflation.
- The ongoing war in Ukraine is seen as an impact on inflation in Australia.
- The general and wider short supply and increasing demand situation globally is driving inflation.
- Globally, inflation is surging and Australia’s rate is not as high as is being experienced in some other nations. Central banks are reacted by increasing their central rates.
- Australian issues are also driving our inflation rate.
- The labour market situation – tightness with shortages being experienced in many sectors, is seen as a driver. Unemployment has remained steady at the lowest rate in 50 years – 3.9%.
- Labour shortages restrict businesses from achieving full production which then flows through to supply shortages that are unable to meet surging demand.
- The 2022 floods have caused increased prices especially in agricultural sector.
- The Reserve Bank forecast is that rate of inflation will start to decline in 2023 after peaking late in 2022.
- Returning to the 2-3% range which has been the RBA’s target for inflation is expected in 2023.
- The rate increases are seen as assisting the return of inflation rates to target.
The Reserve Bank reiterated previous statements around the resilience being show by the economy and the lower rate of unemployment. The Board is continuing with these rate increases as part of the process of withdrawing what it considers was an ‘extraordinary’ level of support to the economy during the onset of the COVID crisis.
This support is not seen as still required and the interest rate situation is being normalised. Governor Lowe says that additional increases will be needed. The exact amount of future increases and when these will be made, will be determined after consideration of the data available.
Tuesday 2 August is the next key date to watch in regard to interest rate increases. This is when the Reserve Bank Board will meet.
While we have to wait until 2 August for the next RBA decision as to how much, if at all, a rate increase will be, analysts, lenders and economists in the finance sector have been giving their opinions on what to expect. Some have been reported as expecting a 0.75% increase and others, a 0.25% increase. So opinion appears mixed.
Governor Lowe has given somewhat of a strong indication that another increase could be the same as June and July which were 0.5%. But the Board will take guidance on the CPI figures and other data on how inflation is tracking.
For RV buyers planning on applying for caravan finance, the comments and the Reserve Bank outlook can be taken as strong indications of further increases. An indication which points strongly to proceeding with that loan application before the next round of rises. If you're looking for more assurance in your financing options, consider exploring RV loans guaranteed options to secure your purchase.
Varying the interest rate when using our Caravan Finance Calculator can provide an indication of how much the repayment estimate can vary with a 0.5% increase and assist buyers. Despite the rate increases, how team continue to source the cheapest rates from across our extensive range of lenders.
Contact Jade Caravan Finance on 1300 000 003 for caravan finance at the cheapest possible interest rates.
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.