RBA can put a handbrake on rate cuts: Finsure

THE Reserve Bank of Australia (RBA) has done enough for the time being with its cuts to official interest rates and needs to sit back, relax and take stock of the effectiveness of its handiwork, says leading mortgage aggregator Finsure Group.

Finsure managing director John Kolenda said with the cash rate at a record low of 1.0 per cent after back-to-back 25-basis point cuts in June and July, the RBA should keep its powder dry and save future rate reductions for any further deterioration in the economy.

"After sitting on its hands for almost three years, the RBA made successive rate cuts to try and boost employment growth in times of global economic uncertainty exacerbated by the US-China trade dispute and concerns over Brexit," Mr Kolenda said.

"Interest rates aren’t the only lever to stimulate the economy and the RBA, for the time being, can apply the handbrake on rates and see what impact income tax cuts, infrastructure spending and the stabilisation of house prices has on consumer confidence.

"The central bank needs to leave some fuel in the tank for potentially more headwinds, although it’s encouraging to see some positive signs in the economy coming through." Mr Kolenda said the Australian Prudential Regulation Authority’s credit easing measures will also provide relief for consumers in what has been a challenging lending market.

"The lending landscape has been highly restrictive with forensic examination and analysis of expenses and activities by the major banks significantly reducing borrowing power for consumers," he said.

"The RBA’s rate cuts and APRA scrapping its minimum 7.0 per cent interest testing rate for bank customer loan applications are both welcome developments for home loan customers."