RBA cuts rates as predicted
(2 November 2011 – Australia) The Reserve Bank of Australia (RBA) cut interest rates for the first time in two and a half years, lowering it by 25 basis points to 4.5 percent.
If passed on in full by commercial banks, today's rate cut will trim mortgage repayments on a typical 25-year, A$300,000 home loan by A$46 a month.
RBA governor Glenn Stevens noted that recent sharp moves on financial markets were likely to act as a drag on Australia's economy.
'The effects of the recent turmoil on confidence may result in a period of precautionary behaviour by firms and households,' he said in a statement accompanying today's decision.
Employment conditions at home have softened and inflation figures have been moderate, giving the RBA room for today's rate cut, Stevens said.
'Over the past year, the board has maintained a mildly restrictive stance of monetary policy, in view of its concerns about inflation,' he said. 'With overall growth moderate, inflation now likely to be close to target and confidence subdued outside the resources sector, the board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and 2-3 percent inflation over time.'
Prime Minister Julia Gillard repeated calls made earlier today by her ministers that the banks should fall in line with the RBA.
'I believe Australian banks should pass on this interest rate cut in full,' Gillard told Parliament.
'Despite our strong economic fundamentals, and they are strong, parts of the community are doing it very tough, are finding it very hard to make the family accounts add up, to get the bills paid,' she said.
She said the central bank's decision also reflected the patchy performance of the economy that the government had been talking about for many months.
'When you have a patchwork economy with resources screaming ahead, and as a result the Australian dollar at high levels historically ... it does put pressure on other sectors of the economy that are trade exposed, including manufacturing,' she said.
RBA governor Glenn Stevens noted that recent sharp moves on financial markets were likely to act as a drag on Australia's economy.
'The effects of the recent turmoil on confidence may result in a period of precautionary behaviour by firms and households,' he said in a statement accompanying today's decision.
Employment conditions at home have softened and inflation figures have been moderate, giving the RBA room for today's rate cut, Stevens said.
'Over the past year, the board has maintained a mildly restrictive stance of monetary policy, in view of its concerns about inflation,' he said. 'With overall growth moderate, inflation now likely to be close to target and confidence subdued outside the resources sector, the board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and 2-3 percent inflation over time.'
Prime Minister Julia Gillard repeated calls made earlier today by her ministers that the banks should fall in line with the RBA.
'I believe Australian banks should pass on this interest rate cut in full,' Gillard told Parliament.
'Despite our strong economic fundamentals, and they are strong, parts of the community are doing it very tough, are finding it very hard to make the family accounts add up, to get the bills paid,' she said.
She said the central bank's decision also reflected the patchy performance of the economy that the government had been talking about for many months.
'When you have a patchwork economy with resources screaming ahead, and as a result the Australian dollar at high levels historically ... it does put pressure on other sectors of the economy that are trade exposed, including manufacturing,' she said.
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