Home loan brokers at Smartline Rockingham love hearing good news. The recent news of the lowered Reserve Bank of Australia (RBA) interest rate drop was great, but its effect may have been even better. The Australian dollar dropped 1.7% against the US dollar almost immediately after the initial RBA rate drop announcement.
Why This is Good News
Glenn Stevens, who is the Governor of the RBA, referred to the exchange rate when announcing the decision to lower the RBA cash interest rate from an already record low 2.5% to a new record low 2.25%.
Mr Stevens referred to the Australian dollar (AUD) falling against the US dollar (USD), but felt that the AUD is still “above most estimates of its fundamental value.” Mr Stevens would go on to say, “A lower exchange rate is…needed to achieve balanced (economic growth).”
One of the prime reasons for lowering the interest rate is to produce a lower exchange rate for the AUD. So far, the current rate drop is succeeding in doing just that. Not only did the AUD fall against the USD, but also against the New Zealand dollar (Kiwi).
What it Means to You
A lowering of the AUD will stimulate the economy because it will allow us to have more success with global exports. The resources industry has fallen from its original peak, but the lower the AUD dollar goes, the more demand it will create for our resources and commodities. There are a lot more factors that come into play here, but the bottom line is that a lower exchange rate is good for our economy.
Currently, those looking to buy a home, whether as a first home, an investment property or an upgrade, are in a great position to take advantage of the current market. Interest rates are down and prices have temporarily stagnated. However, it won’t last forever because a good economy means rising housing prices.
Call (08) 9527 1800 to learn more.