RBA expected to cut rates

Big Rate Cuts Expected

Economists and financial media are predicting that the Reserve Bank of Australia may make some large interest rate cuts when it meets in February 09. The bank has already cut official rates by three percentage points in recent months and is expected to go further after recent figures show the economy continues to slow down. In December 2008 the total amount lent to consumers and businesses fell for the first time since 1992 with a drop of 0.3% compared to an expected rise of 0.5%.

The figures surprised many and led to the Australian dollar weakening against other major currencies including the US dollar and the Euro.

While the drop in rates may bring some good news to those with a mortgage it will not be good for returns from high interest savings account products. Rates on these high interest savings products are likely to drop following any official drop from the bank. The trick is to shop around for banks still offering rates well above the RBA base rate and find the best savings account you can. While average rates for high interest savings accounts have halved over the twelve months there are still many good offers available with some offering extra bonus returns for a fixed period.  If you do have a savings account then make sure your money is working for you and if not then perhaps moving to another account may pay for itself with a boost in interest.