The Reserve Bank of Australia has cut its cash rate to its lowest level since the financial crisis, following a raft of weak economic data that showed pessimism in the jobs market, a slowdown in mining activity and lower-than-expected retail sales.
The RBA cut the cash rate by 25 basis points, or 0.25 percentage points, to 3 per cent, which is the lowest the rate has been since the central bank started setting rates in 1990. It matches the setting in April 2009 at the peak of the GFC.
In New Zealand, the Reserve Bank's benchmark rate is at 2.50 per cent.
The Reserve Bank of Australia has now lowered its key cash rate by altogether 175 basis points since it embarked on the current cutting cycle in November 2011.
Reserve Bank governor Glenn Stevens said in a statement that while the full effects of earlier cuts were yet to be observed, "the board judged at today's meeting that a further easing in the stance of monetary policy was appropriate now".
"This will help to foster sustainable growth in demand and inflation outcomes consistent with the target over time."
Stevens said global growth was forecast to be slightly lower for some time, with risks to the outlook still seen to be on the downside due to the crisis in Europe and continuing fiscal cliff discussions in Europe.
"Recent data suggest that the US economy is recording moderate growth and that growth in China has stabilised. Around Asia generally, growth has been dampened by the more moderate Chinese expansion and the weakness in Europe," he said.
The Australian dollar rose more than a quarter of a US cent to as high as US$1.0455 in the minutes after the decision.
The rate cut was mostly expected by economists, who cited the softening mining sector and the continued moderating of the Australian economy as reasons why the Reserve Bank would move to lower rates.
The recent data showed company profits falling 2.9 per cent in the third quarter, a drop of 0.2 per cent in wage and salary payments in the September quarter, a 2.9 per cent reduction in job advertisements in November, flat retail spending in October and flat house prices in November.
- Sydney Morning Herald