'The interest rate cut is a welcome reprieve but it's not a silver bullet for cost-of-living pressures'
Finally, some financial relief!
For the first time in more than four years, interest rates are coming down, cut on Tuesday by the Reserve Bank by 25 basis points to 4.1 per cent.
That's the good news – and it is good news for mortgage holders who've paid around an extra $54,000 since rates started going up, on top of the massive price rises we've all been paying across the board as inflation soared.
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Deb Knight says the interest rate cut is a welcome reprieve, but it's not a silver bullet for the cost-of-living pressures so many of us are feeling. Nine
ANZ Bank, Commonwealth Bank, NAB Bank and Westpac were quick to pass on the rate cut in full. Supplied
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The big four banks were very quick to pass the rate cut on in full.
Westpac was first out of the gate just a minute after the rate cut announcement was made. NAB, Commbank and the ANZ all slashed their variable rates within five minutes of the cut being announced.
Many have also cut their savings rates too, but the banks knew full well the hammering they'd cop if they didn't deliver the relief mortgage holders were so desperate for.
The rate cut will deliver the average mortgage holder around an extra $100 dollars a month, which is not a King's ransom, but a help nonetheless, and a crucial confidence boost for struggling households and businesses.
So a rate cut is definitely good news, but the bad news is it could be the ONLY cut we see for a while.
It was almost as though Reserve Bank Governor Michelle Bullock was delivering today's cut through gritted teeth.
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She concedes the jobs market is still too strong, that there's a lot of global uncertainty, particularly from the unpredictable tariff threat being wielded by United States President Donald Trump, and Bullock is very clear that the financial markets are far too confident pricing in two more rate cuts by the end of the year.
The rate cut decision was a consensus from the RBA board, but Bullock also said it was not a lay down misère, and certainly not the done deal that many economists and the financial markets had predicted.
She said it was a difficult decision, but interest rates were eased in recognition of the fact that inflation is coming down. So we're getting there, but it's not mission accomplished.
Politically this is manna from heaven for the Prime Minister trying to spruik his economic credentials in an election to be fought over cost-of-living issues.
Some pundits think he might now head to the Governor General's as early as this weekend to call an election for next month to capitalise on the feel-good glow this rate cut delivers.
So Tuesday's interest rate cut is a welcome reprieve, but it's not a silver bullet for the cost-of-living pressures so many of us are feeling, and will continue to feel in the months ahead.
Deborah Knight, hosts Money News on 2GB, 3AW, 4BC and 6PR from 7pm, Monday to Thursday. For more interest rate analysis, click here.
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