Australia cuts key interest rate

Amid increased concern that domestic economic activity has fallen, the Reserve Bank of Australia (RBA) has unexpectedly announced a cut in interest rates by 0.75 percent to 5.25.

With the increasingly poor outlook of the economy, the central bank has announced that they will continue to monitor the situation and make any further adjustments as and when they are needed with the possibility of further rate cuts in the next policy meeting scheduled for December.

It has been the usual blend of falling house prices as well as slump in retail sales and domestic spending that resulted in the biggest slump in the All Ordinaries stock index for over 20 years.

Analysts believe that it was this that resulted in the RBA Governor, Glenn Stevens, slashing interest rates.

In the past week, Australia has followed the US, China, India, Japan and South Korea in reducing borrowing costs in order to reinstate economic growth and fight off recession.

Spending activity is weaker than expected and as a result of internal and domestic developments it was clear that recession was forthcoming with the Australian dollar falling to 66.51 US cents.

The currency has continued to fall ever since its 25-year high of over 98 cents 5 months ago.

The Commonwealth Bank of Australia, the said that it will cut its home loan rates by 58 basis points in order to increase confidence in the housing market that has begun to stagnate.

It is not all doom and gloom, however, as the central bank said that they expect the CPI to grow and safeguard economic growth.

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