Economic news that was weaker than expected is thought to be the reason behind this month's interest rate cut by the Reserve Bank.
The central bank's board said today that although interest rates were at historical lows and the government's fiscal stimulus would help foster "economic recovery in due course'' there had been a need to cut rates again. "The effect of recent international and domestic information had been that the near-term outlook for demand and output in Australia was now weaker than earlier expected, though a recovery in demand was likely towards the end of the year,'' said the board.
The minutes from the RBA's April 7 board meeting were released today and admitted that bringing the official rate to an almost 50-year low of 3 per cent was the result of the recent economic data.
The market had been divided on whether the RBA would cut by 50 basis points or by zero.
Westpac, Commonwealth Bank and the ANZ passed only some of the rate cut on to customers while National Australia Bank and Bendigo Bank did not drop their home loan rates at all.
The banks all blamed higher funding costs for their decision not to pass on the full 25 basis point cut.
The RBA's grim take on the global economy comes a day after Prime Minister Kevin Rudd warned it was "inevitable'' that Australia would be dragged into recession by the slowing world economy.
Mr Rudd used the word "recession'' for the first time as the government prepares to hand down the Federal Budget on May 12.
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