The Reserve Bank has, perhaps predictably, decided to cut official interest rates to a new record low of 1.75 per cent – the first change in rates since May last year.
The Bank has acted to stimulate an underperforming local economy with growing concerns regarding the prospects of the national and international economy.
The latest Australian Bureau of Statistics inflation data reflects a weakening economy with prices falling over the March quarter and the annual result now below the preferred RBA range of 2 per cent to 3 per cent.
The Australian dollar remains above the levels deemed appropriate by policy makers and the prospects for the international economy remain cloudy at best.
Signs continue to emerge that the peak of the retail spending and residential building cycles, which have been significant contributors to recent economic growth, may have now passed.
Tighter lending conditions from banks also remain in prospect, which would further contribute to dampening economic demand.
Jobless data from the ABS recorded another fall over March although most of the improvement came from part-time employment growth.
The aggressive rate cut will lift consumer confidence and prompt more buyers and investors to return to the housing market, added RP Data national research director, Tim Lawless.
“It’s likely that today’s interest rate cut will motivate more buyers back to secure their pre-approvals and dip their toe into the housing market,” he said.
Although official interest rates have been cut, the outlook remains fluid with further cuts likely.
Story originally posted on domain.com.au