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RBA delivers full one per cent

Staff Reporter 2 minute read

The Reserve Bank of Australia this afternoon confirmed what economists expected by delivering a 1 per cent cut to the official cash rate to 3.25 per cent – a 45 year low.

The latest cut will save borrowers around $200 a month in repayments on the average mortgage.

While 3.25 per cent is low in contrast with a cash rate of 7.25 per cent in September last year, there is still considerable scope for the RBA to drop rates further if required.

The US cash rate currently sits at a range of 0 to 0.25 per cent; the UK cash rate was cut to 1.5 per cent in January.

According to the RBA, the decision to cut rates was based on a slowing Chinese economy, significant deterioration to world economic conditions, continuing strains to financial institutions – which all resulted in a downturn in demand around the world.

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“Measures to stabilise financial systems have contributed to an improvement in the functioning of credit markets over the past couple of months.

“This, in conjunction with expansionary macroeconomic policy measures being taken around the world, should assist in promoting global recovery over time. But the near-term outlook for the global economy is the weakest for many years,” the RBA said.

The cash rate cut would “give further support to demand”.

“In making its decision, the [RBA] board took into account the package of measures announced by the government earlier today. The combination of expansionary monetary and fiscal policies now in place will help to cushion the Australian economy from the contractionary forces coming from abroad,” the RBA said.

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