The Weekly Advertiser

EDITORIAL | We must make most of low cash rate

Dean Lawson Editorial Nov 2017

There are many of us who blink vaguely and ‘turn off’ or use the opportunity to get up and make a cup a tea when the evening news switches to the market report.
While enthusiastic household traders keenly soak up the information presented through graphs and speculative assessment, others stare in a state of disinterest, or at the worst, confusion and-or blissful ignorance.
That is… until information flows through about what the Reserve Bank has decided to do, as part of monetary policy, with a national ‘cash rate’.
When this happens, the level of general interest in the adult community rises dramatically.
This is because monetary-policy decisions are likely, in some way, to affect everyone, with mortgagees at one end of the spectrum and retirees at the other.
When the Reserve Bank cuts the cash rate, which it did earlier this month, all sorts of financial circumstances change, which invariably has an impact on everything from business to community confidence. Importantly, for people attempting to achieve a dream of owning their own house while at the same time exploiting the benefits of living in Australia, it’s an opportunity for minor celebration.
The prospect of the pressure from regular interest payments on bank loans perhaps easing comes as welcome news.
Then comes the frustration, questions and disappointment when the banks don’t immediately respond.
The reality is that despite the national cash rate falling to 1.25 percent and regardless of political pressure, banks are under no obligation to pass on cuts.
They are businesses that need to generate profits for shareholders and when it comes to a moral compass they vary considerably.
The longer they delay the changes they must eventually make to match the forces of competition; they make considerable profit.
It is wonderful that we have banks that can help us pursue dreams and projects by lending us money we might never be able to raise under our own steam.
It is also good to remember that it is wonderful for banks that there are always plenty of borrowers to help them generate money through interest payments and fees.
While the old saying that ultimately the borrower is beholden to the lender is true, when it comes to banks it is a two-way street where both need each other.
Fortunately, we can often, depending on what we’ve signed up for, renegotiate our loans.
If not, we can take a bigger step, perhaps look elsewhere in the market and even seek professional advice.
For any business arrangement or relationship to work fairly there must be avenues for bargaining. And for the market to work as it should we must always be willing and never embarrassed to ask for a better deal.

The entire June 12, 2019 edition of The Weekly Advertiser is available online. READ IT HERE!

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Posted on Jun 12 2019

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