The Reserve Bank has cut interest rates to a new record-low of 0.5 per cent and it’s the fourth time they have cut them in the past year.
The RBA made the move largely in an attempt to counter the economic damage from the global coronavirus spread and the recent bushfire crisis here at home.
The Organisation for Economic Cooperation and Development says that even if Australia keeps the coronavirus relatively contained, we can still expect 0.5 percentage points to disappear from economic growth figures.
The RBA in response has decided to get on the front foot.
“The coronavirus outbreak overseas is having a significant effect on the Australian economy at present, particularly in the education and travel sectors,” RBA governor Philip Lowe said in his statement.
“The uncertainty that it is creating is also likely to affect domestic spending.”
“As a result, GDP growth in the March quarter is likely to be noticeably weaker than earlier expected.”
All of the big four banks have immediately passed the official cash rate cut on to customers in full.
Deloitte Access Economics partner Chris Richardson spoke to news.com.au about the RBA’s not unexpected decision.
“This was a sensible call,” he said.
“The Australian economy has been in the slow lane, and a summer of bushfires followed by coronavirus has weighed on confidence.”
“It’s important that the central bank weighs in to remind Australia that we have firepower as well as strong fundamentals,” he said.