As expected another big rate cut.
RBA cuts rates by 100 basis points to 4.25%
The Reserve Bank of Australia (RBA) has cut the official cash rate by 100 basis points to 4.25 per cent, in its last rate decision for the year, in another aggressive move to stoke confidence and boost the economy in the face of a global slowdown.
The RBA, which will not meet again until February, has cut interest rates by 200 basis points in the last three months.
In an immediate response in parliament, Treasurer Wayne Swan said the cut represented "very substantial relief" to families and businesses and he said the Commonwealth Bank of Australia had decided to pass on the rate cut in full.
Mr Swan called on other retail banks to pass on as much of the lower rates as possible to consumers.
RBA governor Glenn Stevens said sentiment in financial markets remained fragile, even though action taken by government and central banks around the world to stabilise their financial systems had begun to take effect.
"There has now been a major easing in monetary policy over the past few months," Mr Stevens said in a statement.
"Together with the spending measures announced by the government, and a large fall in the Australian dollar exchange rate, significant policy stimulus will be supporting demand over the year ahead.
"The board will continue to monitor developments and make adjustments as needed to promote sustainable growth consistent with achieving the 2–3 per cent inflation target over time." Yesterday, an unofficial inflation measure, the TD-Securities-Melbourne Institute inflation gauge, showed a fall of 0.6 per cent in the month of November, the biggest monthly drop since the series began in August 2002.
The inflation gauge recorded an annual growth pace of three per cent in November, down from October's 3.9 per cent level.
However, monthly retail sales figures released today showed a bigger than expected rise of 0.2 per cent in October, against market expectations of a 0.1 per cent increase.
Overnight, US Federal Reserve chairman Ben Bernanke presented a grim assessment of the US economy, the National Bureau of Economic Research said the US economy had been in recession since December 2007, and new data showed the US manufacturing sector was in the worst shape since the early 1980s.
Gross domestic product (GDP) data due out on Wednesday is expected to show the Australian economy grew about 0.2 per cent in the September quarter, and by 1.9 per cent, annually.