Australian interest rate lowest in three years
(3 October 2012 – Australia) As the Reserve Bank of Australia (RBA) responds to a worsening global outlook, official interest rates were cut to the lowest level in three years, down by 25 basis points to 3.25 percent.
Both global and domestic factors were considered in the decision, with the RBA flagging weaker global growth and a high exchange rate as main reasons.
'The outlook for growth in the world economy has softened over recent months, with estimates for global GDP being edged down, and risks to the outlook still seen to be on the downside,' governor Glenn Stevens said in his accompanying statement. 'Economic activity in Europe is contracting, while growth in the United States remains modest.'
'Growth in China has also slowed, and uncertainty about near-term prospects is greater than it was some months ago.
'Key commodity prices for Australia remain significantly lower than earlier in the year, even though some have regained some ground in recent weeks.'
Stevens noted there were first signs that the below-average level of interest rates was beginning to have some of the expected effects on the economy.
'However, credit growth has softened of late and the exchange rate has remained higher than might have been expected, given the observed decline in export prices and the weaker global outlook,' he said.
The RBA also flagged a nearer end to the mining investment boom than it had previously projected.
'Looking ahead, the peak in resource investment is likely to occur next year, and may be at a lower level than earlier expected,' Stevens said in the statement.
The Bank of Queensland (BoQ) was the first bank to react, cutting its standard variable rate by 20 basis points to 6.71 percent immediately after the RBA's announcement.
'The outlook for growth in the world economy has softened over recent months, with estimates for global GDP being edged down, and risks to the outlook still seen to be on the downside,' governor Glenn Stevens said in his accompanying statement. 'Economic activity in Europe is contracting, while growth in the United States remains modest.'
'Growth in China has also slowed, and uncertainty about near-term prospects is greater than it was some months ago.
'Key commodity prices for Australia remain significantly lower than earlier in the year, even though some have regained some ground in recent weeks.'
Stevens noted there were first signs that the below-average level of interest rates was beginning to have some of the expected effects on the economy.
'However, credit growth has softened of late and the exchange rate has remained higher than might have been expected, given the observed decline in export prices and the weaker global outlook,' he said.
The RBA also flagged a nearer end to the mining investment boom than it had previously projected.
'Looking ahead, the peak in resource investment is likely to occur next year, and may be at a lower level than earlier expected,' Stevens said in the statement.
The Bank of Queensland (BoQ) was the first bank to react, cutting its standard variable rate by 20 basis points to 6.71 percent immediately after the RBA's announcement.
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