The Bulletin


Money

Reserve Bank of Australia’s (RBA) interest rate decision preview from CreditorWatch

  • Written by CreditorWatch CEO Patrick Coghlan


The RBA is once again preparing to make an announcement on interest rates. With Australia in the grip of a pandemic, this decision will have a profound impact on how well the economy withstands huge drains on resources. CreditorWatch CEO Patrick Coghlan offers this insight into what might happen.

If the rate stays the same
 
“Last month’s mini-budget announcement has shown the extent that our economy has been devastated by the pandemic. With 870,000 jobs lost between March and May, the Treasurer was right in outlining that our nation has a ‘mountain to climb’. Encouragingly, CreditorWatch data shows that businesses are cautiously optimistic - credit enquiries, a live indicator of business activity, have increased for two consecutive weeks and are currently sitting at pre-COVID levels.
 
“By maintaining interest rates today, this is sympathetic to the balancing act our economy faces. However, there is concern that by extending the likes of the government’s business stimulus packages, we are simply kicking the can down the road. Once the likes of JobKeeper, JobSeeker, Mortgage Holidays and Safe Harbour do eventually come to an end, there will be a seismic shock to the economy as companies will have to either fend for themselves or admit defeat. 
 
“With ten per cent of all businesses in Australia in danger of failing because of lack of cash, we could potentially end up seeing ten years’ worth of administration in the next six months. Therefore, I urge business owners to seriously ask themselves if their companies are going to be viable and if they’re unsure, they should seek advice sooner rather than later. Finance experts, restructuring specialists or bankers - they’re here to help.”
 
If the rate is lowered
 
“Last month’s mini-budget announcement has shown the extent that our economy has been devastated by the pandemic. With 870,000 jobs lost between March and May, the Treasurer was right in outlining that our nation has a ‘mountain to climb’ - today’s interest rate cut is a logical reaction to this.
 
“Whilst this decision will encourage liquidity in markets and keep business transactions and investment flowing, my fear is that there are already too many companies that are likely to fold that haven’t done so yet. Low lending rates and the extension of measures such as JobKeeper, JobSeeker, Mortgage Holidays and Safe Harbour are kicking the can down the road. When these do eventually come to an end, there will be a seismic shock to the economy as companies will have to either fend for themselves or admit defeat. 
 
“With ten per cent of all businesses in Australia in danger of failing because of lack of cash, we could potentially end up seeing ten years’ worth of administration in the next six months. To put that into perspective, we typically, in ‘normal circumstances’, get around 9,500 administrations a year. It would be completely catastrophic. Therefore, I urge business owners to seriously ask themselves if their companies are going to be viable and if they’re unsure, they should seek advice sooner rather than later. Finance experts, restructuring specialists or bankers - they’re here to help.”

Finance & Money

Reserve Bank of Australia’s (RBA) interest rate decision preview from CreditorWatch

The RBA is once again preparing to make an announcement on interest rates. With Australia in the grip of a pandemic, this decision will have a pro...

CreditorWatch CEO Patrick Coghlan - avatar CreditorWatch CEO Patrick Coghlan

The government has just sold $15 billion of 31-year bonds. But what actually is a bond?

There are the Boxing Day sales, and there was this week’s rush of extremely cashed-up investors desperate to get a slice of this week’s ra...

Peter Martin Visiting Fellow, Crawford School of Public Policy, Australian National University - avatar Peter Martin Visiting Fellow, Crawford School of Public Policy, Australian National University

Can you really test 'values' via multiple choice?

The Morrison government has announced plans to revamp[1] the Australian citizenship test. From November 15, there will be...

Malcolm Turnbull condemns Scott Morrison's 'gas, gas, gas' song as 'a fantasy'

Malcolm Turnbull has launched a swingeing attack on Scott Morrison’s gas-led recovery, labelling his threat to build a ...

5 experts on the first TV leaders' debate of NZ's election

Hagen Hopkins/Mark Tantrum (Getty)Prime Minister and Labour leader Jacinda Ardern and National Party leader Judith Collins ha...

Writers Wanted



News Company Media Core

Content & Technology Connecting Global Audiences

More Information - Less Opinion