Mixed response to interest rate cut in Port Macquarie as retirees told to brace for another hit

Yesterday (June 4) the RBA cut the official interest rate by 0.25 percentage points to a record low of 1.25 per cent as it looked to turn around sluggish employment, wages and inflation.

The decision came three hours after the Australian Bureau of Statistics released another month of weak retail data on the back of falling house prices and historically low wages growth.

Mid North Coast NSW Business Chamber Regional Manager Kellon Beard believes the rate cut will have a "modest benefit" to the local economy.

"Only about one-quarter of households in our region, or a little over, have a mortgage so they will get a bit more money to spend if all the banks pass the cut on," Mr Beard said.

"Alternatively, they may choose instead to put that extra money to their mortgage and not spend it.

"For the two-third of households who either own their own home or rent, there is no real benefit."

Mr Beard continues to be concerned about retail spending in Port Macquarie.

"Spending is okay - it is holding up, just, but certainly nothing to write home about."

A shop owner who didn't want to be named echoed Mr Beard's sentiment saying retail had been "very quiet" lately in Port Macquarie.

While those with mortgages will be celebrating others might not be so enthused.

Managing Director of financial planning business Morgans in Port Macquarie Craig Watson said it would spell bad news for retirees living off their savings.

"It is quite unfortunate for our retiree population," Mr Watson said.

They are already under quite a bit of income pressure because we are in a low interest environment and this cut is going to further exacerbate that position."

He warned retirees to brace for another interest rate cut later this year.

"It is unusual that the RBA would only make one cut of 0.25 per cent because that is not going to have a significant impact on its own," Mr Watson said.

However, it is not all bad news for retirees.

If there is another interest rate cut Mr Watson predicted the deeming rate used for the aged care income test would be be reduced.

"There is no sign of this currently but it would be usual practice for the government to review that deeming rate to reflect current interest rate settings," he said.

"If you get two interest rate cuts you would anticipate that Centrelink would then assess the deeming rate."