'Households could do with interest rate cut to ease burden'

JOHANNESBURG - Consumers drowning in debt will have to stomach high repayment costs for longer after the Reserve bank decided to keep the repo rate unchanged.

This is the first time the central bank’s monetary policy committee has paused on rates after a cumulative 75 basis point cut in its three previous meetings.

This means the repo rate still sits at 7.5% while the prime lending rate is at 11%.

Some trade unions and civil society groups say households could do with an interest rate cut to ease the burden.

But economists say the Reserve bank has to make tough and unpopular decisions - even at the risk of appearing unsympathetic to consumers.

Standard bank group chief economist Goolam Ballim said "No doubt many would clammer for low interest rates because it eases their debt burdens and can stimulate economic activity, but the reserve bank wants lower inflation perpetually, they want to overtime create an environment create growth that is sustained.”

General secretary of trade union federation (Saftu) Zwelinzima Vavi admits lower interest rates are not the silver bullet to address socio-economic challenges calling for other reforms to help the process along.

“There must be addressing of the economic structure. There must be recognition that our education system, healthcare, our levels of poverty and our lack of participation by the majority is not helping us at all so yes, there must be structural reforms that favour the distribution of wealth from the rick to the poor,” said Vavi