Interest Rates take a hike

Wednesday 11 February 2015
Nic Crowther's picture
Co Editor
The Shaker

Ring the bells! Glenn Stevens has emerged from the bowels of the Reserve Bank to announce that interest rates are heading further south than anyone could have imagined.

Well, the markets have certainly factored in the possibility of another cut in the coming months. The idea of the cash rate sitting at 2% before the middle of the year seems to be a distinct possibility.

This has brought forward more talk of governments forgetting about the asset recycling programs that pretty much ended the reign of Campbell Newman. Why not simply invest in infrastructure at record-low bond rates and simply get it done. Borrowing the cash needed to build, say, a tram makes perfect sense, given the interest rate is unlikely to outgrow inflation. 

The simple maths is this – the money will be worth less that when you borrowed it, and voila – you’ve got your tramline without hammering the annual budget…

…for now.

It makes sense for Sydney’s Second airport infrastructure; it makes sense if you really want a fast train from Melbourne to Brisbane. There will almost never again be a cheaper time to pursue whatever pie-in-the-sky project you wish to impose upon the citizenry in the hope it doesn’t end up as derided as the ol’ monorail.

This applies for business as well, If you need capital to take your business to the next level, you should be looking seriously at raising what you need right now.

Whichever way you look at it, 2015 is the year of cheap money.