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RBA: When interest rates will finally be cut


Since before the RBA began raising interest rates in May last year, analysts and commentators have been attempting to predict the peak of the cash rate and when interest rates would start coming down.


Over the past two years, that task has been more than a little bit challenging.

From predictions of a peak RBA cash rate of 1.25 per cent to forecasts of rate cuts pencilled in for around now, there are precious few who have managed to accurately predict the path of Australian interest rates.


In order to gain some perspective on how long rates could stay high, when they may end up being cut and by how much, we’ll be taking a look at historic interest rate cycles over the past 60 years.

Given that the RBA cash rate departed from being a direct 1 to 1 proxy for mortgage rates over 30 years ago, the focus will be placed on RBA records of the benchmark standard variable rate for owner occupiers.


It’s worth noting that in some instances, the peak of mortgage rates occurred slightly later than the peak in the RBA cash rate. This is due to banks raising rates “out of cycle” without prompting by the RBA.


Since 1963, there have been 11 rate cut cycles, ranging from a cut of 0.25 per cent in 1972 and 1975, to an 8.25 per cent reduction in the cash rate between 1990 and 1993. The duration of rate cut cycles has been equally variable, with the three rate cut cycles of the 1960s and early 1970s lasting just one month and the latest rate cut cycle starting in 2011 lasting 102 months. The overall average for the duration of an RBA rate cut cycle is 24 months, from peak to trough.



The time between mortgage rates hitting their cyclical peak and the RBA cutting interest rates has also been a highly mixed bag of results over time.


The shortest time at peak rates was recorded in 2008, when mortgage rates remained at cyclical highs for just three months. Meanwhile, the longest mortgage rates were held at their peak was recorded following the 1986-1987 rate rise cycle, with rates staying high for 16 months.


On average, interest rates have stayed at their cyclical peak for just 9.8 months in rate cut cycles over the past 50 years.


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