Operators that have delayed buying plans may benefit from expediting purchases to secure cheaper equipment finance interest rates before the next rate decision. While lenders in the business finance sector make individual and independent decisions around their own interest rates they are typically guided by the cash rate decisions as made by the Reserve Bank Board.
As most will be acutely aware, there have been increases in the cash rate each month since May 2022 as the RBA focuses on its objective of returning the rate of inflation to the 2-3% range. As announced by the Australian Bureau of Statistics (ABS) on 11 January, the rate as of November has once again edged up.
This comes following a fall in inflation for the October period and the rise happens to be for the same amount. The rate for November rose by 0.4% lifting the inflation level back from the 6.9% October rate to again be 7.3%. The RBA did have an outlook for the rate to hit 7.75% in 2022 and altered this outlook to 8% in December. The annual figures would be available after the monthly data for December and the Quarterly CPI report to December are released on 25 January.
If those figures reveal a further increase, the RBA may need to act with another cash rate increase. But Governor Lowe is not revealing too much in regard to detail after the response received in the latter part of 2022 at a Government Committee re the 2021 indications that rates may not rise until 2024.
What is known from the December Board meeting and in remarks by the Governor and Deputy Governor following that meeting, is that all options are on the table. The Board considered the arguments for a number of options including halting the current run of rises. It also considered another 0.5% rise before settling on consistency with the 0.25% cash rate decision.
The December statement also noted that further increases could be expected. With no meeting to discuss the cash rate in January, 7 February is now the date to watch. For astute operators it could be the date to get in before to ensure cheaper equipment interest rates for new machinery.
Inflation Rises in November
Reviewing the ABS statement announcing the November CPI figures reveals what areas of the economy are contributing the most to the current inflationary situation. Ms Marquardt from the ABS said that these were:- housing including new dwellings recording a 9.6% rise; transport 9%; food and drinks (non-alcoholic) rose 9.4%; an 8.4% rise in the household equipment sector; and recreation and culture rose 5.8%.
For those in construction it will come as no surprise to see Ms Marquardt note that it was higher costs for both labour and the costs of materials which were contributing most significantly to the annual new dwellings prices. However, she also notes that the November rate eased from the 204% recorded in October.
The food sector is also being impacted by the increases in operating costs especially electricity pricing. Supply issues as a result of the flood events through 2022 which are continuing, also affected food prices.
The travel and holiday sector recorded a different trend to the norm for November. Usually prices dip at that time as school resumes after the holidays. But November 2022 saw a 12.8% hike. This was attributed to demand and jet fuel costs.
Prospects for Equipment Finance Interest Rates
As mentioned above, the focus will now turn to the release of the December Quarterly CPI figures on 25 January. The RBA mentioned in its December statement that some pricing would not be reflected in the inflation rate until that quarterly data was released. If the data indicates that inflationary pressures are still strong, it will be interesting or more specifically of great interest to see how the RBA responds.
Business operators and owners that do want to beat any possible equipment finance interest rates increases can speak with us for quick action on sourcing quotes. With many banks and non-bank lenders in our lender panel, we are well-placed to source the cheapest rates from across a wide selection.
The prospect of continuing high inflation also highlights the importance of securing cheaper interest rates on machinery and equipment finance to keep expenses as low as possible to offset high costs in other areas of the business. In addition to focussing on those cheaper rates, business owners can also look to tax measures such as temporary full expensing with Chattel Mortgage Equipment Finance to further enhance the finance option.
This tax measure is only on the table until the end of the financial year. Another compelling reason to expedite acquisitions of new plant, machinery and equipment with finance.
There will be numerous announcements coming up in the next few months which have the potential to affect equipment finance interest rates. For regular updates in easy to understand format, check in with our News pages as we post new information on a weekly basis.
For cheaper equipment finance interest rates contact Jade Equipment Finance on 1300 000 003
DISCLAIMER: IF MISINTERPRETATIONS, MISREPRESENTATION OR ERRORS EXIST IN THIS ARTICLE, NO LIABILITY IS ACCEPTED. THE INFORMATION IS PROVIDED ONLY FOR GENERAL PURPOSES AND NOT IN ANY MANNER INTENDED AS THE ONLY SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADDITIONAL GUIDANCE OR ADVICE SHOULD REFER TO AN INDEPENDENT FINANCIAL ADVISOR.
