Reserve Bank slashes 1 per cent off cash rate
- 7th October 2008
PRIME Minister Kevin Rudd has welcomed the Reserve Bank's decision to cut the cash rate by 100 basis points, to six per cent, after its board meeting.
The move by the central bank was double the 50 basis point fall economists had predicted.
Mr Rudd told reporters in Brisbane the decision would help maintain the stability of the financial system and see Australia through "tough times ahead".
He said Australia was dealing with "extraordinary economic times".
"The Government welcomes the relief the Reserve Bank of Australia's decision will provide to working families and Australian small businesses," Mr Rudd said.
"We are dealing with extraordinary economic times ... when some 25 banks around the world have either failed or have had to be bailed out.
"As a consequence we, in this country, are conscious of the need to take decisive economic policy action.
"The cornerstone of the Government's policy is to ensure the continued stability of the Australian financial system.
"We believe that given the pressures which borrowers face, there should be maximum pass-through to working families and to small businesses.
"And the reason is we want to make sure that those who are currently borrowers get relief and at the same time maintaining the stability of the Australian banking system."
Treasurer Wayne Swan said the action would help the Australian economy.
A peak New South Wales business group says banks should pass on the cut to customers.
NSW Business Chamber chief executive officer Kevin MacDonald said the move would help boost confidence for workers and businesses in the midst of the global financial crisis.
He said consumers were tightening their belts and that had impacted on business.
"What's important now is for the banks to pass on the cuts to their customers in a financially prudent and sustainable manner," he said in a statement.
"The banks must also take into account the margin between the official cash rate and business interest rates which has been widening.
"Business owners deserve this relief and we'd expect them to receive it in a responsible manner which demonstrated a competitive market for business finance."
The Mortgage & Finance Association of Australia has welcomed the decision by the central bank to cut the cash rate by 100 basis points.
"One hundred basis points is an excellent boost, but there may be more required over the next year to keep the momentum in the lending market going," MFAA chief executive Phil Naylor said.
"How this plays out for mortgage borrowers will depend on each lender's degree of reliance on international markets for funding and the interplay of competition in the Australian mortgage market."
It is the first 100 basis point cut to the cash rate since May 6, 1992, when the RBA lowered the cash rate to 6.50 per cent.
- © AAP
