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Is this why the RBA didn't cut rates in May?


As you'd know from many news articles over the past year or so; general expectation from 2018 was that we'd see rate rises by the end of this year. More recently however, some news outlets were suggesting that cuts more likley so it's safe to say that no one actually knows what's going to happen until it does (as recently evidenced by Sportsbet's decision to pay out prior to the election...just sayin')

An SMH article surfaced last week which has suggests a $7.5b reason why the Reserve Bank will hold on any further rate cuts for now. According to the Gareth Aird who complied the Commonwealth Bank Report, a little known tax break is coming in July this year.

The $7.5 billion worth of tax cuts that many households will receive will effectively have the same effect as a 0.5% RBA cut; creating 0.6% of disposable income. There are further tax breaks coming in the following year also.

As the article states it would explain why CBA has maintained that the RBA will not move on rates for another 18 months or so.

Either way, it's interesting reading and we'll see the particulars of those tax cuts in 2 months time.

The full article is here and does explore the impacts of the previous Rudd Government's $900 billion GFC stimulus and a comparison to the current economy.

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