Official interest rates have been cut by 100 basis points, in a move to kick start the local economy. The Reserve Bank of Australia met today for the first time this year and aggreed to cut the cash rate by 1 per cent.
Interest rates are now at 3.25% which is the lowest level since 1964. Today's cut is the fifth consecutive reduction in six months and the official rate is now 4% lower than in August of last year.
If the cut is passed on in full a homeowner with a $400,000 mortgage will save nearly $300 a month. So far, none of the lenders have commented on possible rate cuts. During the past four official rate cuts, only a handful of lenders passed on the full rate cuts, while others held a small percentage back.
RBA governor Glenn Stevens said the board took into account the package of measures announced by the Government earlier today. He also cited a "significant deterioration" in the world economy since last year. "The combination of expansionary monetary and fiscal policies now in place will help to cushion the Australian economy from the contractionary forces coming from abroad," he said.
Many economists predicted a one per cent cut, while some were even looking for a 1.25% cut. There were some cautious financial experts saying they expected just 0.75% cuts, but all were agreed that more cuts were needed.
Figures out last week from several sources showed the major world economies had stalled, and with rising unemployment a real threat in Australia the RBA moved to help reverse the slide into a recession.
The rate reductions began in September 2008 when the RBA was aware that the economy was beginning to slow, and each month that followed brought new rate cuts. Today the central bank met for the first time since December.
|