The Reserve Bank has announced another better-than-expected cut to interest rates of 75 basis points
The Reserve Bank has announced another better-than-expected cut to interest rates today, reducing the official cash rate by 75 basis points to 5.25 percent.
Most experts were predicting a quarter-to-half percent drop, however there was growing speculation the RBA would be reluctant to provide any further cuts after the Federal Government released its $10.4 billion compliment to the Bank’s decision to cut interest rates by a full percent last month.
However the release of a number of key economic and industry indicators have shown a continued slide in consumer spending.
Retailers have been hit particularly hard, with the latest Australian Bureau of Statistics figures for the sector showing a modest 0.2 percent growth in September, compared with 0.7 percent the year before.
As a result the Australian National Retailers Association says this has filtered through in the loss of 7,800 full-time jobs in the past 12 months.
RBA Governor Glenn Stevens says this was part of the decision for a second substantial cut.
“On balance, it appears likely that spending and activity will be weaker than earlier expected,” he says.
He says signs that inflation is on track to steadily retract from its 13-year high of 5 percent also gave the bank confidence in its decision.
Industry groups are calling on the banks to pass on the full 0.75 percent cut immediately.
Prime Minister Kevin Rudd yesterday put the banks, particularly the majors, on notice, saying there was no reason why they could not pass the whole cut on.