Borrowers welcome savings but RBA says another cut isn't likely soon

Economists are warning more interest rate cuts are unlikely this year after the RBA dropped the official cash rate from 4.35% to 4.1%.

Transcript

00:00Here at Southern Cross Station, this is where the daily grind begins for so many Melburnians.

00:08And it certainly has been quite the grind over the past couple of years with the real

00:14cost of living pain that everybody is having to endure.

00:18So it's no surprise that so many people I spoke to this morning as they are busily going

00:23into work were just really relieved and happy at the news that the RBA has cut official

00:30interest rates by a quarter of 1%.

00:34But when you look at the fact that on an average $500,000 home loan, that reduces monthly repayments

00:42by about $77.

00:46Many of the people that I spoke to said that that reduction really doesn't begin to even

00:51touch the sides.

00:52This is what they had to say.

00:54Cost of living has gone up and interest rates are high and yeah, we don't have enough extra

01:01surplus.

01:02Since they started increasing, we are above $1,500, right?

01:06So $77 doesn't make much difference.

01:08Whatever you can save is good, you know, everything is expensive these days, so yeah, a little

01:14help is a big help.

01:15It's great, but I wish it had been a bit more, but it's terrific.

01:21I know a lot of people are doing like two jobs to try to maintain their life, so hopefully

01:26they can relieve a bit.

01:28So just a snapshot there of what people are thinking and that is that they definitely

01:32would like to see another interest rate cut hot on its heels of this one that's just been

01:38announced.

01:39However, the Reserve Bank Governor Michelle Bullock really appears to have poured cold

01:43water on that idea despite market expectations that we will see potentially quite a few cuts,

01:50the first of which is in the middle of the year.

01:52She did say that that really depends very much on the data that is going to continue

01:57to come forward and at the moment, as she says in her words, that those predictions

02:03are far too confident.

02:05Now one of the key measures that they will be looking at, which is coming out imminently,

02:10is what's going on with employment and we've got the wage price index that's going to be

02:15coming out today from the Australian Bureau of Statistics.

02:20That is expected to show another 3% increase in wages and so that is potentially a bit

02:26of a concern for the RBA because that all goes into that inflation picture as well.

02:33And also tomorrow, we are going to be seeing the unemployment data come forward.

02:38Now at the moment, we've got a very tight employment market with unemployment still

02:44sitting at a very low 4% so that's definitely going to factor into what the Reserve Bank

02:50is considering when it next meets at the end of March and the beginning of April.

02:56But from what we're hearing from commuters here, they really would like to see just a

03:00little bit more relief to help them through their family's financial burdens right now.