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Reserve Bank Australia

Weak domestic growth sees RBA cut interest rates, again

The Reserve Bank of Australia (RBA) has cut the official cash rate by .25 basis points to 3.5 percent in its meeting today, citing a slowdown in growth as a key driver behind its decision. 

According to governor Glenn Stevens indicators suggest conditions in Europe are continuing to deteriorate, and growth in China and the US is moderating. On the domestic front, growth remains modest and significantly varied across sectors.

Conditions in other areas of Asia have begun to recover following the effects of natural disasters last year, but could begin to be impacted be slower growth in China.

Locally, financial market sentiment has deteriorated over the past month and business credit has increased strongly too.

“…Both households and businesses continue to exhibit a degree of precautionary behaviour, which may continue in the near term,” he said.

Stevens said no new inflation data has come to light since its last meeting, adding that it’s expected to be in the 2-3 percent range. Despite this, Stevens said the board judged that moderate domestic growth and uncertainty in the international environment “afforded scope for a more accommodative stance of monetary policy.”

Last month, the RBA cut the cash rate by .50 basis points, also in an effort to stimulate growth. The official cash rate is now at its lowest level since 2009, during the height of the Global Financial Crisis.

Both business and consumers will now wait to see whether any of the big lenders pass on the some, or all of the rate cut.