The Reserve Bank of Australia (RBA) has cut interest rates by 25 basis points today, the second official drop in as many months and the first back-to-back rates cut in almost three years.
The RBA reduced the official cash rate to 4.25 per cent from 4.50 per cent, giving homeowners about a $600 reduction on annual mortgage repayments for the average $300,000 loan. (More From Yahoo!7 Finance: How To Maximise Your Financial Position From An Interest Rate Fall)
The RBA is always looking to ward off future problems and this rates cut is seen by many as a pre-emptive strike against the fall-out from worsening economic conditions in the eurozone.
The rate cut will be seen as a welcome stimulus to local retailers and those in the service industry leading up to Christmas. The Council of Small Business Organisations of Australia (COSBOA) has pleaded with Australia's banks to pass on every percentage point of any rate cut made by the RBA.
Thousands are predicted to go bankrupt in the next 12 months and "more businesses will fail if the major banks do not pass on the full rate cut," COSBOA chief executive Peter Strong told Fairfax. (More From Yahoo!7 Finance: Retail Steady As She Goes, Not Sinking)
Australia's big banks will not guarantee that they will pass on the full value of any official interest rates cut to customers, but they must be preparing for higher levels of mortgage stress with the possibility of an unemployment spike in 2012.
With no scheduled interest rates meeting in January, the RBA was forced to make a judgement call on how bad it thought the situation in European would get. While there is nothing to stop the Reserve Bank from calling a special monetary meeting in January, it would take an emergency similar to the GFC to justify such an action.
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57 Comments
Never will Swan give us a surplus, it would be a first for Labor.passing on the cuts will be the next thing, they had better.
ReplyOh thank you RBA !!! all I need now is the woman and the percentage sign to cuddle up with a smile and I good to go.
ReplyEveryone only talks about paying the mortgage. If there is no money for industry to employ and pay salaries then it doesnt matter how much they cut the rate.. you wont be able to pay anyway.
ReplyWhere are the goodamn rate cuts for Manufacturing, or has the government forgotten that tax is what keeps the government going. If money is not available for the Australian manufacturing Industry then you better hope that your local store will be able to supply everything from China, cuz there wont be any Australian made products available, Learn to eat more rice.
ReplyThis country is seriously screwed. The more these people meddle the bigger the problems get. First they promote irresponsible borrowing and then they make the responsible people IE the savers pay for that irresponsibility. Before they are done interest rates will be a cool 0.1 pct. Oh sorry savers i guess your going to have to gamble all your wealth away in the world casino. The only difference is you don't need a card to set limits like they are doing at the club. For those savers looking for a tip, stay away from government bonds, government infrastructure projects, GOVERNMENT. I think i would prefer a system of government that was autocratic, at least then it would be obvious that we are all slaves to this rediculous economic system. What i think i will do is go out run up huge debts and then do what the europeans are doing and put my hand up for bankruptcy, then i can collect a nice fat pension and have someone tell me it wasn't really my fault, not really.
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