The RBA's decision for an October rate increase didn't come as a significant surprise, although the choice of a 25 basis points rise instead of 50 basis points pleasantly caught some off guard. Within certain finance and related circles, there's been a notable advocacy for the RBA to moderate its rate hikes, given the looming specter of a global recession.
While perhaps not unexpected, the latest decision marks the sixth rate increase this year, propelling operators to consider expediting their new vehicle acquisitions with finance prior to the next hike. The announcement's accompanying statement hints at forthcoming rate rises by the Board, intended to restore inflation to predefined target levels.
To facilitate the comprehension of this latest decision for business proprietors and operators, we've distilled the key points into an easily digestible format for quick reference and review. Furthermore, we contextualize the October rate increase in relation to new truck finance and truck loan interest rates, aiding in understanding its potential implications.
October Rate Rise Announcement
The RBA announces its monthly cash rate decisions following its meetings which are scheduled on the first Tuesday of the month, excluding January when no meeting is held. The announcement statement is somewhat brief but contains vital information as to why the decision came about, comments on the global and domestic economic outlook and usually some form of forecast for rates moving forward.
This initial statement is followed up with a lengthier paper and often speeches by Governor Philip Lowe to business groups. The Minutes of each Board meeting are also posted to the RBA website in the weeks following each meeting.
The October statement covered some of the same ground as the September and prior statements as many of the global and domestic factors which are driving inflationary pressures are still present. The decision was made by the Board to lift the cash rate by 25 basis points which is 0.25% to 2.6%.
The Board said it was committed to, over time, returning inflation to its target range which is 2% to 3%. It said the October rate rise would assist in achieving this objective. In a key indicator for operators considering new vehicles with finance, the Board said that further rises will likely be required in the period ahead.
In a comment which has been interpreted by some analysts as an acknowledgement by the Board that some easing in rate rise was required, the Board notes how the cash rate had been substantially raised within a short time period. The Board reflected on this in arriving at its decision for a 0.25% rate rise.
Other points of note in the statement:-
- Australia, as with many other countries, is experience a rate of inflation which is too high.
- Global issues are given as the explanation for much of the soaring inflation.
- Domestic factors are also contributing, especially the high level of demand relative to the supply.
- The expectation for inflation is for further increases in coming months before a decline is seen.
- Specifically, 7.75% inflation this year, slightly above 4% in 2023 and around 3% in 2024.
- The high terms of trade levels are seen as providing a boost to the national income.
- The tight labour market and difficulties in recruiting workers was once again mentioned.
- In regard to unemployment, another decline is expected before, as economic growth starts to slow, an increase is seen.
- The Board said it is continuing to pay very close attention to the ‘evolution’ of the costs of labour and the pricing behaviour of businesses.
- Uncertainties were identified in regard to achieving a balance of return to target inflation while maintain the Australian economy in a stable state. Primarily the uncertainty is in regard to global economic conditions which have recently deteriorated.
So the key takeout for business operators is to expect more rate rises in the months ahead. The Board next meets for consideration of the cash rate on the first Tuesday in November.
Truck Finance and the Latest Rate Rise
Individual lenders adjust the rates in their markets according to their own guidelines, assessment of the economic situation and other factors. Truck finance interest rates can be impacted by the RBA October rate rise but Jade Truck Loans continues to support operators with better truck finance rates.
While we always focus on achieving the cheapest truck interest rates operators taking on new finance can also look to other measures and the structure of the finance to achieve a more workable monthly truck loan repayment. By using the Truck Finance Calculator, which allows for term, loan amount and balloon/residual to be varied, buyers can establish the most suitable for their truck finance.
Business owners can also look to taking advantage of the temporary full expensing tax measures. While not reducing the interest payments or the finance payments, this measure allows for a generous deduction on taxable income for 2022/23. The benefit being realised through less tax payable that year. All of course subject to meeting eligibility criteria. Chattel Mortgage For Commercial vehicles is considered most appropriate for this purpose.
While all eyes will be on the RBA November decision, the Treasurer will be announcing his first budget in coming weeks and that may also be relevant to asset acquisition decisions.
Contact Jade Truck Loans on 1300 000 003 for cheaper truck finance.
DISCLAIMER: THIS INFORMATION IS ISSUED PURELY FOR THE PURPOSE OF GENERAL INFORMATION PROVISION. IT IS NOT TO BE TAKEN AS THE ONLY SOURCE OF INFORMATION FOR BASING FINANCIAL DECISION-MAKING. THOSE REQUIRING FINANCIAL GUIDANCE AND ADVICE SHOULD CONSULT WITH THEIR FINANCIAL CONSULTANT OR ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY MISREPRESENTATION OF POLICIES, DATA OR ERRORS IN THIS CONTENT.