Re­serve bank cuts cash rate

Port Douglas & Mossman Gazette - - FRONT PAGE -

THE RE­SERVE Bank sur­prised many ex­perts on Tues­day af­ter it de­cided to cut the cash rate to a record low 2.75 per cent.

Econ­o­mists were widely tip­ping that the cash rate would re­main on hold at 3 per cents af­ter Tues­day’s meet­ing, but the board’s de­ci­sion will be pop­u­lar with both con­sumers and retailers.

‘‘With the peak in the level of re­sources sec­tor in­vest­ment likely to oc­cur this year, there is scope for other ar­eas of de­mand to grow more strongly over the next cou­ple of years,’’ RBA gover­nor Glenn Stevens said.

‘‘(The bank) judged that a fur­ther de­cline in the cash rate was ap­pro­pri­ate to en­cour­age sus­tain­able growth in the econ­omy, con­sis­tent with achiev­ing the in­fla­tion tar­get.’’

Stevens said in­fla­tion was cur­rently run­ning ‘‘lower than ex­pected’’, with the ex­change rate, on the other hand, ‘‘lit­tle changed at a his­tor­i­cally high level over the past 18 months’’. It comes as the Fed­eral Govern­ment down­graded its an­nual rev­enue forecasts, warn­ing in­come had plunged $17 bil­lion due to a China-driven com­mod­ity slow­down and pres­sures from the dol­lar. The de­ci­sion had an im­me­di­ate im­pact on the Aus­tralian dol­lar which fell be­low US102c. just af­ter the an­nounce­ment.

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