Interest rates will stay at record low for YEARS as cost of living barely rises – here’s what it means for your mortgage and salary
- The Consumer Price Index rose by just 0.9 per cent annually in December 2020
- This is well below the Reserve Bank of Australia’s two to three per cent target
- This means interest rates set to remain at a record low of 0.1 per cent for years
Australian consumer prices rose by just 0.9 per cent in 2020 which is good news for home borrowers and workers.
Headline inflation remains well below the Reserve Bank of Australia’s two to three per cent inflation target, used to determine interest rate movements.
RBA Governor Philip Lowe vowed in early December that interest rates would stay at a record-low of 0.1 per cent for at least three more years.
Home borrowers are set to keep benefiting – with the big banks offering fixed rate mortgage rates of less than two per cent – after the Australian Bureau of Statistics revealed on Wednesday an annual inflation increase of just 0.9 per cent.
Workers deprived of decent pay rises are also set to benefit with inflation rising at an even weaker pace than the minuscule 1.4 per cent increase in the wage price index.
Australian consumer prices rose by just 0.9 per cent in 2020
The Consumer Price Index in the December quarter rose by 0.9 per cent in three months, with the quarterly figure matching the annual figure.
This was even weaker than the September quarter’s 1.6 per cent increase but much stronger than the June quarter’s deflationary 1.9 per cent fall in prices.
A 7.5 per cent fall in electricity prices was the biggest drag on overall inflation during the December quarter.
Melbourne had Australia’s highest inflation, with the CPI rising by 1.5 per cent in the December quarter, compared with one per cent in Sydney.