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Don’t bank on mortgage relief any time quickly, says Westpac chief economist Bill Evans

A leading economist expects the Reserve Bank will hold fire on cutting the cash rate any further amid rumblings on financial markets it could be reduced to 0.1 per cent.

The central bank slashed the cash rate to a record low 0.25 per cent in March among a suite of measures to combat the economic slowdown in response to the COVID-19 pandemic.

The Reserve Bank’s minutes of its September 1 board meeting, released on Tuesday, reaffirmed that fiscal and monetary support would be required for some time given the outlook for the economy and the labour market.

“The board … agreed to maintain highly accommodative settings as long as required and to continue to consider how further monetary measures could support the recovery,” the minutes said.

The meeting took place the day before the June-quarter national accounts showed the economy had contracted by a hefty 7 per cent, confirming the first recession in almost 30 years.

Westpac chief economist Bill Evans said while there was speculation the cash rate could be cut to 0.1 per cent in the future, he expects the central bank will remain patient.

“My personal view is that it is unlikely that they would move to such a low rate at this stage,” he said, noting Reserve Bank governor Philip Lowe has previously stated that 0.25 per cent would be the effective low.

Commonwealth Bank chief economist Stephen Halmarick expects that low interest rates will provide ongoing support to home buying.

“We recently revised our house price forecasts for a peak-to-trough decline of minus 6 per cent — previously minus 10 per cent — but with substantial deviation expected across the capital cities,” Mr Halmarick said.

AAP

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