RBA outlines ‘neutral’ rate, banks dominate Australian economy

ABC NEWS (Australia)

Governor Michele Bullock has provided a wide range of 1 to 4 per cent for what the Reserve Bank considers the 'neutral' rate, but recent decisions suggest it's a difficult figure to maintain amid economic shocks. And, while the Commonwealth Bank is Australia's most valuable company, it's not the only bank sitting high on the list of our largest corporations.

Transcript

00:00After the interest rate cut yesterday, when's the next one?

00:06The RBA's cash rate is now at 3.6%, and Governor Michelle Bullock said yesterday the so-called

00:12neutral rate, where it's not pumping or slowing the economy, is somewhere between 1 and 4%.

00:19That sounds like a wild gap, but actually if they could keep it there, it'd be like

00:24taming a lion.

00:26In the past six years, it's spent just over one of them in that range – just 16 out

00:31of 72 months.

00:34The difference between what it costs to borrow and then lend the money is called the net interest

00:39margin.

00:40Commonwealth Bank's margin lifted to almost 2.1% this year, and it's a big part of what's

00:45fuelled today's mega profit, which was up 7% to more than $10.1 billion.

00:53The share price fell because the profit only met expectations – it didn't beat them.

00:58You really can't please some people.

01:01US inflation results weren't as bad as investors feared – it looks like interest rates will

01:05get cut there next month.

01:07Our dollar lifted marginally against the greenback, stuck in that 65 US cent range.

01:14And gold rose more than a full percentage point – it has soared in value by 37% this year.

01:21Now back to the banks.

01:23The Commonwealth is clearly our most valuable company, ahead of miner BHP, Blood Products

01:28Group, CSL and the other big banks, NAB and Westpac.

01:32Three banks in the top five, five in the top ten.

01:36Yeah, that seems like a normal, diversified economy.

01:40And that's finance.

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