Another record low cash rate! The RBA cash rate statistics page doesn’t even record the last time it was as low as 1.75%, only going as far back as January 1990. Debt has not been this cheap in Australia for decades.

The main reason the RBA gave for this historical low rate is due to “…inflationary pressures (that) are lower than expected.” This means the Australian economy is not growing as much as it is expected or at recent levels, and in order to stimulate the economy the RBA lowered the cash rate to promote households and businesses to take on more debt for investment to boost the economy.

The RBA choosing to cut the cash rate is a big decision and not taken lightly. The RBA would only cut the cash rate where they see the economy heading south for the foreseeable future and need strong measures to curb this downfall. So while debt may be cheaper, employment levels are declining and asset prices in general are falling.

Whether to buy property now is a trade off of factors:

• debt is cheaper so you could borrow more,
• however unemployment is increasing so job certainty is waning,
• property prices are falling but where is the bottom of the market?, and
• how long do you plan to hold the property to weather the slump back to higher prices and return on investment?

Speculation of a further 0.25% rate cut on 1 June would suggest a wait-and-see approach to buying property. And I hope you have a variable rate mortgage!