The Reserve Bank of Australia cuts rates for the fourth time, in as many months. The cuts are aggressive - two of them were 100 basis points - and more cuts are forecast for next year. So what does all this mean?
In September, the RBA started off with a modest cut of 25 basis points. This small drop was the first cut since December 2001 and indicated that Australia may be in trouble. In October, many were shocked with the 1 per cent rate cut, which was an aggressive cut perhaps meant to stimulate the economy.
Then in November, a further 0.75 % cut showed that previous attempts hadn't worked and Australia was still close to a recession. Today's rate cut shows the RBA is willing to do whatever it takes to help the local economy.
The RBA governor and Treasurer Wayne Swan are both urging banks to pass on the latest cuts to borrowers.
"As a result of today's decision, the cash rate will be at its previous cyclical low point," writes Governor Glenn Stevens. "Given trends in money market yields, most lending rates should fall significantly and will also reach below-average levels."
Falling interest rates are great for anyone with loans. Car loans, personal loans, home loans amongst the big ones. However, low rates are not always a good thing for everyone. Low rates tend to reflect low growth and currently we are seeing un-employment figures rise Australia-wide.
How much home loan rates continue to fall remains to be seen but for home owners at least, Christmas may be a time of joy after all.