The Reserve Bank of Australia did as expected this week and cut the official cash rate to a new record-low of 0.75 per cent.
The nation’s central bank didn’t stop there, indicating it will cut rates again if employment, economic growth and the global economy don’t improve.
The cut sent the Australian dollar down to below US67c and has the cash rate at a level very close to where the RBA said it would consider quantitative easing policy.
Despite calls from the Treasurer to pass the cut on in full, the first two big banks to move did not, they were the Commonwealth who passed on 13 basis points and the NAB who passed on 15 basis points.
In the RBA’s statement, governor Philip Lowe said the aim was to lift employment and indicated more cuts were likely.
“It is reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target,” the statement said.
“Forward-looking indicators of labour demand indicate that employment growth is likely to slow from its recent fast rate.”
JPMorgan’s Sally Auld told Australian Financial Review the RBA sounded particularly downbeat on the labour market.
“The chance of a follow-up cut in November is now higher, especially if Friday’s retail sales data show little sign of sequential improvement,” she said.
Ms Auld said it was possible the RBA could again cut rates as early as next month.