Treasurer Joe Hockey has welcomed the Reserve Bank’s move to cut interest rates. Photo: Alex Ellinghausen
Declaring “the shackles are off the Australian economy”, the Treasurer Joe Hockey has embraced the first in what might be a series of Reserve Bank interest rate cuts, saying it has room to cut again.
On Tuesday the Reserve Bank of Australia cut its so-called cash rate from 2.50 to 2.25 per cent, the first such move in 18 months. The cash rate is now the lowest since 1959, before three quarters of the present Australian population was born.
Two small banks, the Bank of Queensland and ME Bank, immediately passed on the cut, cutting their flagship mortgage rates to 5.13 per cent and 4.62 per cent. It’s the first time advertised mortgage rates have been below 5 per cent since the 1950s.
RBA governor Glenn Stevens cited “below trend” economic growth and “quite weak” domestic demand as the reasons for the cut.
The RBA’s economic update, to be released on Friday, will mark down its previous forecast of economic growth of 2.5-to-3.5 per cent during 2015. The markdown will be less severe than if the bank hadn’t cut rates, because its forecasts will incorporate the economic boost it expects the cut to deliver.
The Australian dollar tumbled more than one and a half cents on the cut, hitting a fresh five-and-a-half year low of US76.57 cents, down from US78.16 cents minutes before.
source:smh.com.au
STUDIO 3 NEWCASTLE AUSTRALIA 