Yesterday afternoon the RBA announced they are cutting the cash rate by 0.25% down to a record low 0.50%.The main reason for this is, as expected, the world wide impact of the Coronavirus.

Prior to the outbreak it looked like the slowdown of the global economy was coming to an end, however, it remains hard to tell how persistent the effects of the coronavirus will be. In an unprecedented move, a lot of central banks and reserve banks in the major western countries committed to an easing of monetary policy ahead of their official announcement deadlines! This was done in a bid to calm down the global markets and avoid panic sell-offs as well as ensuring assistance is provided in the areas of the economies that are hardest hit by Coronavirus.

It’s not all doom and gloom of course, unemployment rate is fairly stable, there are further signs of a pick-up in established housing markets and in the cases of Sydney and Melbourne, quite strong too. Once the Coronavirus is contained, the Australian economy is expected to return to an improving trend, but until then, it will assist areas of the economy most affected by the coronavirus, such as the Education and Travel sectors.

In a nutshell. Australia’s economy is strong and robust but the global outbreak of the coronavirus will delay progress and it’s unsure exactly how long for.Therefore a rate cut was introduced to avoid panicky situations. And now, we wait and see which bank passes on what.

As Scott Morrison said: we all expect the banks to also take responsibility and put in their bit towards helping our economy.

At time of recording this video, both CBA and Westpac have announced to pass on the full cut. They were very quick in announcing this. Funny that again, the two banks that were in most trouble in the past few years are now on their very best behaviour.