The Reserve Bank of Australia (RBA) has cut the official cash rate by a quarter of a per cent to a record low of 1.5 per cent. This rate cut was predicted by most economists.
In today’s monetary policy statement, RBA governor, Glenn Stevens, said the global economy is continuing to grow, but at a lower than average pace.
Mr Stevens also noted that growth of the Chinese economy appears to be moderating.
In regards to the Australian economy, the RBA governor said, despite a ‘very large decline ‘in business investment, overall growth is still continuing at a moderate pace – and that inflation remains quite low’.
In fact, commentators have noted that inflation is actually at a 17 year low.
Furthermore, addressing concerns about Australia’s hot property market, the governor said that housing prices have only risen ‘moderately’ this year. He also said that growth in lending has slowed down.
Therefore, in the governor’s view, cutting interest rates was the appropriate decision – taking into account prospects for sustainable growth in the economy, inflation returning to target over time, and the ‘likelihood of lower interest rates exacerbating risks in the housing market has diminished’.
After the RBA made its decision, the Australia dollar has fallen by 0.16%, and is now buying 75.24 US cents.
