
On this episode of Table Talk, Doug sat down with finance expert Jason Featherby from Leeuwin Wealth to break down the complex world of interest rates, inflation, and the Reserve Bank of Australia (RBA). Will the RBA cut rates soon? Whether you’re a mortgage holder, a retiree, or just curious about the economy, here’s what you need to know.
Meet Jason: A Financial Advisor with a Unique Focus
Jason has been a financial advisor for over 20 years, specialising in helping individuals who have experienced catastrophic injuries. His work often involves managing large trusts and providing financial advice to people facing life-changing circumstances.
“When you talk to most people, they’re worried about returns,” Jason explains. “But after an accident, priorities shift. It becomes about what you can afford, the care you need, and maintaining quality of life.”
The Role of the Reserve Bank of Australia (RBA)
Jason broke down the basics of the RBA, describing it as the “boss bank” of Australia. Its primary job? Controlling money flow through interest rate decisions. The RBA meets regularly to review data like inflation rates, employment figures, and housing prices. Based on this information, they decide whether to raise, lower, or maintain interest rates.
“Think of the RBA like having one big tool in the toolbox—a hammer,” says Jason. “That hammer is interest rates.”
Inflation and Interest Rates: What’s Happening Now?
Recent inflation figures showed a rate of 2.4% for the year, which is within the RBA’s target range of 2-3%. This sparked optimism in the financial markets, as it signals potential interest rate cuts in the near future. However, Jason highlighted that the RBA looks at “trimmed inflation,” which excludes volatile items like fuel and travel. This measure currently sits at 3.2%, slightly above the target.
Will Interest Rates Be Cut Soon?
Jason believes there’s an 80% chance that the RBA will cut interest rates in its upcoming meeting, possibly as soon as February. “If they cut rates by a quarter of a percent, it could kick off a rate-cutting cycle,” Jason predicts. Some banks anticipate up to five rate cuts, which could significantly reduce mortgage costs.
What Does This Mean for You?
- Mortgage Holders: A 1% reduction in interest rates on a $500,000 mortgage could save around $5,000 a year in interest. That’s more money in your pocket for everyday expenses.
- Retirees: On the flip side, retirees who rely on interest from savings accounts may earn less when rates drop.
“Interest rate cuts aren’t good news for everyone,” Jason notes. “It’s great for mortgage holders but not so much for those living off their savings.”
The Delicate Balancing Act
While rate cuts can boost spending and economic confidence, cutting too quickly could reignite inflation. The RBA faces the tough task of balancing these factors, especially with government pressures in play.
Whether you’re hoping for lower mortgage payments or watching your savings account, the RBA’s decisions in the coming months will have a significant impact. Stay tuned as we follow these economic shifts and break them down for you in simple, relatable terms.