The RBA did cut the ‘official cash rate’ by 0.15 percentage points to another record low of 0.1% today. Yes, that is big news and just one step closer to zero. But I couldn’t help noticing a much more important thing RBA will do.

RBA announced to buy $100 billion worth of Australian government bonds. Generally, the rate cut to 0.1% affects short term interest rates, but it doesn’t do much for long term rates, which depends on how the market evolves. But the bond purchasing, so-called Quantitative Easing, means that the federal government is determined to keep medium-term interest rates down and a lower Australian dollar.

In the RBA’s own words, “the Board is not expecting to increase the cash rate for at least three years.” “The Board is prepared to do more if necessary.” “The Bank remains prepared to purchase bonds in whatever quantity is required to achieve the 3-year yield target.” And that means more easing to come.

These are indeed unprecedented and unusual times. And there still seems a long way to go.

It should be good for our exporters and business that wants to borrow and expand. It is good for mortgage payer for a reduced payment too.

But for savers, cash is like a poison which value will go backwards after inflation and bank fees. And the future is going to be worse in the medium term in the next few years based on RBA’s decision.

Investment market will be volatile going forward, but not being invested would be even worse over the long run, as lower rates over the foreseeable period of time will ultimately push people to invest and push up asset prices increase accordingly.

Therefore, as an investor under such a dramatic time, I think the best course of action is to make sure you continue to invest sensibly and regularly when you can.

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