Where to for interest rates? Watch New Zealand.
News out of New Zealand today is that their Reserve Bank has lifted interest rates for the second month in a row. The cash rate across the ditch is now at 0.75%, while in Australia it remains at 0.1%.
The Reserve Bank of New Zealand offered the below as reasons for the rate rise:
- New Zealand’s public health restrictions are easing as the country transitions into the COVID-19 Protection Framework, which will enable greater mobility of people, and goods and services.
- Underlying economic strength remains supported by aggregate household and business balance sheet strength, fiscal policy support, and strong export returns.
- Capacity pressures have continued to tighten. For example, employment is now above its maximum sustainable level. A broad range of economic indicators highlight that the New Zealand economy continues to perform above its current potential.
The RBNZ’s overall concerns are around labour shortages, and a property market that has defied gravity. They’ve lifted rates with a view of cooling the market down, and the commentary suggests more rate rises to come next year.
While official rates remain on hold in Australia, we can look to our neighbours across the Tasman for a little insight as to what’s in our not-too-distant future, although the RBA has indicated more than once that it doesn’t intend to increase interest rates here til 2024.
So what does this mean for Aussies in the immediate future?
- If you have money in the bank, sadly you won’t be making any more money on it, because unless they’re forced by the RBA, the banks won’t be increasing deposit rates any time soon.
- If you have a variable home loan, you’re thankfully unlikely to see an increase in your interest rate until the RBA moves.
- But if you are in the market for a fixed home loan, there’s a good chance rates are going to continue their upwards trajectory, even without the RBA’s input. Westpac and CBA have already bumped their fixed rates up, so I expect they will continue that trend.