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Reserve Banks Cuts Rates Another 25 Points

Filed under Business, Latest News

June 5, 2012

The Reserve Bank of Australia announced today that it will cut the cash rate by 25 basis points to 3.50 per cent, pushing interest rates to their lowest level since the height of the global financial crisis.

The latest cut comes just a month after the RBA slashed 50 basis points off the cash rate – its first cut since December 2011 and the largest since February 2009.

The RBA cited an uncertain global economy, modest domestic growth and a benign inflation outlook as the reasons for the latest cut.

In its statement released with the rate decision, the RBA said recent indicators suggested “further weakening in Europe and some further moderation in growth in China”.

“Commodity prices have declined lately, though they are mostly still high. Australia’s terms of trade similarly peaked about six months ago, though they remain historically high,” the statement said.

“In Australia, available indicators suggest modest growth continued in the first part of 2012, with significant variation across sectors. Overall labour market conditions firmed a little, notwithstanding job shedding in some industries, and the rate of unemployment remains low. Nonetheless, both households and businesses continue to exhibit a degree of precautionary behaviour, which may continue in the near term.”

However, it remains to be seen how much of this latest cut will pass through the banks and into the pockets of South Burnett mortgage holders and businesses.

Most bank loan holders only received about 60 per cent of the May cut after banks cited the high cost of securing funds on overseas markets as their reason for being unable to pass on the full amount.

The Bank of Queensland announced that it was lowering its mortgage rate 25 minutes after the RBA’s announcement, but only ny 20 basis points, but other banks have yet to announce how much of the latest cut they’ll pass on to borrowers.

The Australian dollar rose slightly to US97.92c after the decision, while the stock market rose 1.5 per cent to erase some of yesterday’s heavy falls.

Other banks have yet to announce how much of the latest cut they’ll pass on to borrowers.

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