Interest Rate slashed

Published: October 07, 2008 - 09:42 PM

The Reserve Bank cuts interest rates by 1%

By Lesley Coombes

The recent interest rate cut by the Reserve Bank is a timely blessing for homeowners given the current economic turmoil, the Herald Sun reported.

In an attempt to save Australia from global recession, the Reserve Bank cut interest rates by a full percentage point last week, reducing it to 6 per cent.

Prime Minister, Kevin Rudd was quick to stand up for the Reserve Banks decision saying "We are dealing with extraordinary economic times... when some 25 banks around the world have either failed or have had to be bailed out."

It is a welcomed relief for families struggling to pay off their mortgages.

The Storer family, interviewed by the Herald Sun, recently moved into their first home, saying the interest rate cut has come at an opportune time. With their $260, 000 mortgage, the family can now save $40 a week. Mr Storer said he was excited because this extra $40 a week could now go to other household expenses.

The Australian Chamber of Commerce and Industry (ACCI) said that businesses will also feel the benefit. ACCI's director of policy, Greg Evans said “This significant rate reduction will provide much-needed relief in an environment where businesses face more difficult trading conditions, due to the impact of slowing domestic demand and recent international financial market instability.”

Although this interest rate cut is good tidings all round, some industries will not feel the same benefit as others. According to the Victorian Employers Chamber of Commerce and Industry (VECCI), the exports and tourism industries will feel a strong benefit while transport and other oil reliant industries will not.

In the midst of this financial meltdown, households and businesses must be vigilant and exercise a proactive approach towards household expenses if they wish to stay ahead. With full deregulation of the Victorian energy market as of 1st January 2009 and market forces driving gas and electricity prices, Victorians will have to use their initiative when choosing the best energy deal available.

David Power of ShopAround.com.au says “When you're trying to save a dollar, when your bank account is getting a little low, one of the first things you do is shop around and compare prices. Doesn't it make sense to do the same thing when the world's bank account is getting low? Also, once full deregulation of the energy market is implemented, Victorians will need to stay on their toes if they want cheap electricity and cheap gas. If you want to stay ahead in such a volatile economy or you simply want to compare your gas suppliers and compare electricity suppliers with what else is on offer, ShopAround.com.au provides an efficient gas and electricity comparison service.”

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