Updated on
Summary Australia's central bank on Tuesday cut the official interest rate to 3.25 percent.
The Reserve Bank of Australia slashed 25 basis points off the cash rate, taking it to lows not seen since October 2009 when the bank first resumed hiking rates following the world downturn.Governor Glenn Stevens said global weakness was weighing on the outlook, with Europe contracting and the United States only seeing modest growth.The outlook for growth in the world economy has softened over recent months, with estimates for global GDP being edged down, and risks to the outlook still seen to be on the downside, he said in a statement.Growth in China has also slowed, and uncertainty about near-term prospects is greater than it was some months ago. The Australian dollar slumped about half a US cent on the surprise cut, to US$1.0320 from US$1.0369.Stevens said commodity prices, a key factor in mining-powered Australias economic prospects, remained significantly lower than earlier in the year, weighing on export earnings.Looking ahead for mining, Stevens said the peak in resource investment is likely to occur next year, and may be at a lower level than earlier expected, with demand in other areas of the economy yet to strengthen as forecast.On the domestic front Stevens said the labour market appeared to be softening despite the unemployment rate remaining relatively stable at 5.1 percent, with credit growth slowing and the Australian dollar still high.At todays meeting, the board judged that, on the back of international developments, the growth outlook for next year looked a little weaker, Stevens said. The board therefore decided that it was appropriate for the stance of monetary policy to be a little more accommodative.
