RBA rate cut: Business leader not convinced rate cut will help

NEW LOW: The Reserve Bank of Australia cut the official interest rates to a historic low of 1.25 per cent on Tuesday. Photo: FILE
NEW LOW: The Reserve Bank of Australia cut the official interest rates to a historic low of 1.25 per cent on Tuesday. Photo: FILE

SLASHING the official interest rate to a record low of 1.25 per cent may be aimed at stimulating a slowing economy, but a Western NSW business leader is not convinced it'll work.

On Tuesday afternoon the Reserve Bank of Australia (RBA) decided to lower the cash rate by 25 basis points (one quarter of a per cent).

This marked the first rate cut since August, 2016.

Just 30 minutes after the cut, ANZ was the first of the four big banks to pass on savings to its customers by decreasing its variable home loan rates by 0.18 per cent.

The other banks have not yet committed to passing on the cut to borrowers.

In its announcement, the RBA board said it took the decision to "support employment growth and provide greater confidence that inflation will be consistent with the medium-term target".

"Today's decision to lower the cash rate will help make further inroads into the spare capacity in the economy.

"It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target."

But, NSW Business Chamber Western NSW regional manager Vicki Seccombe said there were two reasons why the cut may not make much difference.

"For a lot of small businesses I talk to, it's not so much the cost of the loan that is the problem but rather getting finance in the first place," she said.

Western NSW, NSW Business Chamber regional manager Vicki Seccombe. Photo: FILE

Western NSW, NSW Business Chamber regional manager Vicki Seccombe. Photo: FILE

"Red tape and excessive regulation on lending has made banks much more reluctant to take on risk and lend to business. Another rate cut isn't going to change that."

Ms Seccombe said for people who already have a loan, there was the issue of how much of this rate cut will actually flow through to business over time.

"For most business in our region, there are far more important things that need to be addressed," she said.

"This includes the drought and water management, energy costs, skills, better tax incentives to invest and better infrastructure."

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