RBA says more rate cuts if needed
March 31, 2009
The Reserve Bank of Australia (RBA) says there is scope to cut interest rates further if needed, with domestic economic growth expected to fall in 2009.
RBA deputy governor Ric Battellino also said Australia was better placed to ride a revival in the global economy, and that were some positive signs in recent economic data in the US.
"The monetary policy transmission process has been effective and there remains scope to ease policy further if circumstances require," Mr Battellino told the Urban Development Institute of Australia National Congress 2009 in Brisbane on Tuesday.
Mr Battellino also said households and businesses across Australia had benefited from cuts to the official interest rate, unlike in other nations where rate cuts had not flowed through as well to those sectors.
The RBA lowered the cash rate from 7.25 per cent to a 45-year low of 3.25 per cent between last September and February in a bid to cushion the economy from a possible recession.
"Like all other economies, the Australian economy was very much affected by the extraordinary events of last September. As in other countries, confidence was severely eroded by the spectacle of large US financial institutions either collapsing or coming under immense financial strain. Concerns began to arise about the safety of our own financial institutions, even though they were in a very strong position. The Australian Government therefore elected, as did governments in other countries, to guarantee the debts of banks.""The Reserve Bank responded to this with a very substantial lowering of interest rates: between September last year and February this year the cash rate was reduced from 7¼ per cent to 3¼ per cent."
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