RBA considers unconventional alternative to cutting cash rate

Christopher Joye

Coolabah Capital

In the AFR today I reveal that very senior industry participants believe the RBA and APRA are considering a targeted alternative to a cut to the official cash rate, which would involve lowering the minimum 7.25 per cent interest rate banks use when assessing a home loan borrower’s repayment capacity by 50 basis points to 6.75 per cent (read here or AFR subs can click here).

This would improve the average home buyer’s borrowing capacity by more than 5 per cent and increase demand in the weak housing market, which was a key driver of the low March quarter inflation numbers (newly built house price inflation declined by 0.2 per cent while rental inflation was very soft at 0.1 per cent).

I go on to argue there are several reasons why this more targeted approach to supporting the weakest component of the Australian economy may be preferred to an outright cut to the Reserve Bank of Australia's cash rate...

Read the full column here.


Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs over $8 billion with a team of 26 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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