RBA cuts interest rates Tuesday June 4

Associate Professor Michael De Martinis answers Business degree course student questions about the impact of the RBA’s cut in official interest rates.

Student:

Is a cut in the RBA interest rate a cause for concern or celebration?

A/Prof. Michael De Martinis:

Interest rates have a wide-ranging impact on people and the broader economy. For people with loans or wishing to borrow money for a house, car, holiday, or even everyday expenses, an interest rate cut is good news. The interest they pay on a loan will be less! So, they will have more money to spend. This extra spending money also helps businesses and the wider economy to grow. Of course, there are lots of variables. People may decide to save rather than spend because of uncertainty about the future. And, for people who rely on interest income, such as retirees with money in the bank, this is not so good news. They will get less interest income and have less money to spend.

Student:

But what really concerns me is getting a job; how does this news affect me?

A/Prof. Michael De Martinis:

For businesses with loans, an RBA interest rate cut is good news. Banks provide loans to businesses. A reduction in the RBA’s interest rate has an effect on the interest rates banks charge for loans. Banks will charge businesses a lower interest rate. Businesses will subsequently have a lower interest expense and this saving can be spent on investing in and growing the business. For example, the business may buy new and better machinery, employ more staff or invest in new property.

Generally, people with smaller mortgage and other loan interest payments will have more money to spend on the things businesses manufacture. This helps Australian and overseas businesses grow. In the end, growing businesses means more job opportunities for you!

Student:

Why do I need to know about such business matters?

A/Prof. Michael De Martinis:

You may have heard the age-old saying, ‘money makes the world go around’. To really understand this saying requires knowledge, not only about how interest rates affect people and the broader economy, but also about other factors, such as inflation, unemployment, foreign exchange rates and more.

At MIT we will teach you to ask the right questions. You will learn to ask: why is the RBA cutting the official interest rate? What are economic indicators and why are they so important? What role does the RBA fulfil in supporting Australian businesses?

You will leave MIT with a depth of knowledge about business and money related issues such as accounting, finance, e-commerce, tax law, digital marketing, business analytics, and entrepreneurship. You will be prepared to ask the right questions that will open up great career choices. And more job opportunities for you!

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MIT encourages bold, independent thinking and provides the highest quality academic experience to stretch your thinking. You’ll get challenged – not spoon-fed. And you’ll thrive on plenty of personal autonomy. Our smaller class sizes mean you’ll enjoy more one to one time with your tutors.

We know that employers want more from graduates than a degree qualification. It’s why we ensure you are skilled with practical skills, fresh thinking and the soft skills in demand by employers. Plus, you can fast track your studies with our trimester system and accelerate your path to your new career.

 

For more details: Bachelor of Business, Graduate Diploma of Accounting, Master of Professional Accounting.

 

 
Mmartinis

A/Prof. Michael De Martinis

Associate Professor Michael De Martinis is the Course Coordinator of Postgraduate programs (MPA & GDAC) and Lecturer in both Postgraduate and Undergraduate (Bachelor of Business) programs in the School of Business  at Melbourne Institute of Technology.

His research areas include "Auditing (Production and Performance)" and "Public Sector Accountability".