(3 February 2009 – Australia) The Reserve Bank of Australia has announced its decision to cut the official cash rate to 3.25 percent, the lowest level in 45 years.The RBA’s decision to cut rates by 100 basis points is the fifth consecutive rate reduction, excluding the break taken in January
It is the lowest rate since 1964, when rates were 3.18 percent and also the first time that the cash rate has fallen below 4.25 percent since the RBA changed its criteria for setting cash rates in 1990.
At the same time last year, the RBA increased interest rates by 25 basis points to 7.00 percent, and continued to increase rates in March before the slide started in September of 2008.
The last five rate cuts have come to a significant four percent overall, meaning that the cash rate has more than halved over the last year.
In making its decisions, the RBA said that economic conditions in Australia have been affected, though less than in other advanced economies.
The decision came down to the combination of last year’s financial turmoil, a severe global downturn and substantial falls in commodity prices has had a significant dampening effect on confidence, and therefore on prospects for growth in demand, the RBA said.
Inflation has begun to moderate and, given recent developments, it is likely to continue to decline, the RBA added.
The RBA made its decision to cut interest rates based on these economic conditions and also taking into account the Federal Government stimulus packaged also announced today.