• Mayfair 101

Official Interest Rates Cut to Boost Consumer Confidence

Updated: Jun 28



The Reserve Bank of Australia (RBA) has today cut official interest rates yet again to a record-low of just 0.25% in an attempt to support the Australian economy following the outbreak of COVID-19.   Interest rate cuts are a means of stimulating economic growth by making capital more affordable. For existing borrowers rate cuts can lead to lower interest repayments, and loans for new borrowers may now become more affordable. Overall, it can increase consumer confidence, which is what the RBA has in part sought to achieve with the interest rate cut, given the significant impacts of COVID-19.


Is quantitative easing the solution?


Quantitative easing is often referred to as “printing money”. Today, it usually refers to central banks buying government securities in the market, and thus increasing the level of cash in the economy.  It is a move that reserve banks around the world have historically resorted to as a means of stimulating growth by putting more money into supply. We are in a position of needing economic growth to be stimulated, but is increasing the supply of money the solution? An increase in the supply of money can lead to an over-supply of money if that money isn’t taken out of circulation over time, which can lead to lower (and therefore potentially negative) interest rates. It’s a simple yet often overlooked factor. If the RBA decides to push “go” on its money printer, we consider that rates will head into negative territory over time, just like they have in many overseas countries.


What you can do about lower rates


Many investment products are directly tied to interest rates, meaning investment returns are about to take a further dive.  Products that are exposed to single sectors or single countries are facing challenging times if their sector or country is suffering following the COVID-19 outbreak. We consider that a multi-sector, multi-geography, multi-currency strategy is the best way to manage risk and prepare for unexpected events like COVID-19. Diversification is a risk management strategy the Mayfair 101 Group believes strongly in, with a portfolio spanning business credit, real estate, financial services, emerging markets and growth companies.




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This website is published by Online Investments Pty Ltd (t/a ‘Mayfair 101’) (ABN 981 34 785 890, AFSL Auth. Rep. No. 001 274 568 of Quattro Capital Group Pty Ltd (ABN 88 128 914 965, AFSL 334653)). It is provided by way of general information only, is subject to change, and may not be relied upon by any person. Mayfair 101 is an Australia-based provider of investment and corporate advisory services, including funds management, asset management, capital raising, corporate advisory, mergers and acquisitions advisory, and direct investment, either directly or through members of its corporate group. Mayfair 101’s authority under its appointment by Quattro Capital Group Pty Ltd under the Corporations Act 2001 (Cth) is limited to the provision of financial services to wholesale clients in Australia only, including general (not personal) financial product advice relating to deposit products, foreign exchange contracts, derivatives, interests in managed investment schemes and securities. Mayfair 101 and the members of its corporate group may have a beneficial interest in the financial services and products of that group. Mayfair 101 provides advice in relation to financial products of its corporate group only, and terms, conditions and risks apply in respect of such financial products. Such financial products are not a comprehensive range of all possible investment products, are not bank deposits and (like most investments) may be subject to greater risk of capital loss and negative returns than traditional investment products. Prospective investors are strongly encouraged to seek independent professional legal, financial, accounting, taxation and valuation advice before deciding whether they consider any financial products to be suitable for them, and to request any relevant disclosure documents (such as Product Disclosure Statements and/or Information Memoranda) to ensure that they are fully informed before making any investment decision. Past performance should not be relied on as an indicator of future performance. The financial products offered by Mayfair 101 and its corporate group are available to wholesale clients resident in Australia only. Mayfair 101 does not accept investment from retail clients, non-wholesale clients or residents of countries other than Australia. Mayfair 101 and the members of its corporate group are not deposit-taking institutions in Australia or elsewhere and are not authorised to conduct banking activities under the Banking Act 1959 (Cth).

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