The RBA has announced an interest rate cut prior to Christmas.
The retail sector will be welcoming today’s decision by the RBA to cut interest rates by 25 basis points, in the hope that it will encourage more people to shop during the Christmas rush and post Christmas sales.
After last month’s hold, many predicted that this month the RBA will cut rates before the Christmas period. Glenn Stevens, Governor: Monetary Policy Decision, announced that the cut comes at a time when global growth is forecast to be below average. He added that long term interest rates faced by highly rated sovereigns, including Australia, remain at exceptionally low levels.
Stevens also noted that private consumption spending is likely to grow at the release of this rate cut, however returns to the strong growth of recent years is unlikely.
Gary Green, director of Bibby Financial Services, commented that the cut will likely help SMEs thinking of borrowing. “A further cut in official interest rates will help boost business confidence and prompt greater levels of investment in all sectors of the economy, which the Australian economy needs.
“The RBA’s credit data suggests that the business sector is struggling and that borrowing costs remain too high. Our own research shows that SMEs fear their customers or suppliers could become insolvent in this uncertain economic environment, as revealed by our own Bibby Barometer Small Business Survey.”
