Australia’s interest rate is as close to zero as it’s ever been. Could it ever go lower?

PHOTO: RBA governor Philip Lowe says he will not cut interest rates beyond 0.25%.ABC News: John Gunn

Australia’s main interest rate was cut to 0.25 per cent this week, the lowest in history.

The unprecedented decision by the Reserve Bank was part of an emergency package to prevent the financial system melting down as large parts of the economy are boarded up to stop the coronavirus spreading.

Does it mean Australia’s interest rate may soon hit 0 per cent? Is there a possibility we could see negative interest rates?

Well, according to the RBA, it’s already offering zero rates anyway, for practical purposes. And it’s extremely unlikely Australia will see negative rates.

What happens in a world of negative interest rates?

Negative interest rates are a strange phenomenon.

They’re intended to incentivise banks to lend more freely during periods of extreme economic uncertainty or financial market dislocation.

But they have economic consequences, in a topsy-turvy way.

READ MORE VIA ABC