The Reserve Bank of Australia has cut the official interest rate to a record low 1.75 percent, just hours before the federal budget is handed down this evening.
It follows the rate remaining unchanged at the previous record low, 2 percent for twelve consecutive months.
Governor Glenn Stevens commented that monetary policy has been accommodative for quite some time and low interest rates have been supporting demand and the lower exchange rate overall has helped the traded sector.
He went on to explain that credit growth to households has continued at a moderate pace, while that to businesses has picked up since the previous cut 12 months ago.
These factors are all assisting the economy to make the necessary economic adjustments, though a rising exchange rate could complicate this.
In reaching today’s decision, the Board considered developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to subside. At present, the potential risks of lower interest rates in this area are less than they were a year ago.
Taking all these considerations into account, the Board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting