As a Financial adviser, and with the Reserve Bank lifting rates once again with another 0.25% increase. We know this will start to bring some stress to Australian families. The decision was driven by the RBA’s desire to return inflation to target and at the current 7%. This aim of this increase is to provide greater confidence that inflation will return to target within a reasonable timeframe. For those who are impacted on a recent rate rise, then it is important to discuss this with your Boutique Financial Adviser.
What does this mean for the short-term future?
Some further tightening may be necessary to ensure that inflation returns to target, but that depends on how the economy and inflation evolve. The RBA board is paying close attention to global economy developments, household spending, and the labor market. The board maintains they are determined to return inflation to target. This indicates at least another rate rise may be needed.
There is evidence that economic indicators are improving with retail sales slowing to more normal levels. Employment growth is stabilizing and monthly CPI, although slightly higher than expected, is still consistent. Overall, these factors appear to be first impacts of policy having an effect on inflation. We now wait and see what further effects the Reserve Bank’s decisions will make.
For clients with finance lending in place, the next few months will be interesting. Fixed lending rates are in some cases lower than the variable rate which in normal times would indicate that the banks feel rates are getting close to the peaks. We however do know they have been wrong before.
What you should do
Obtain Financial advice so you can talk about re-negotiating your loans with the bank. Locking rates away will be dependent on individual positions but will be an important decision.
For our deposit holders who have endured a few years of decreasing deposit rates, how long will the rates keep rising? Further advice about when you enter again into the investment market or into bonds, which are seemingly gathering plenty of interest.
Like always have a chat to one of our Boutique Financial Advisers to make sure yo
u are on track.