Bank of Australia expected to reduce interest rates further

There is further indication that the central bank of Australia is planning to give the economy a much needed boost, as the minutes of the latest meeting have been revealed.

It seems that a combination of a reduction in interest rates, as well as a further financial stimulus package, will be used in order to kick-start the economy over the short-term as it is hoped that the combined measure will encourage consumers to begin spending again.

At the meeting earlier in the month the Reserve Bank of Australia (RBA) lowered interest rates to 3.25 percent which is a 45-year low, although members acknowledge that this measure would take time to take effect.

A statement from the RBA indicates that the combination of measures has been to taken due to the speed of the global contraction and that over the short-term, the demand for output is still very weak.

Analysts are predicting that rates will fall further by another 0.25-0.75 percent and that any further decision making will be driven by the medium-term prospects.

At the meeting, the RBA said that gross domestic product was expected to be flat at the end of 2008 whilst analysts agreed that the Australian economy is unlikely to be able to avoid contraction even with the recent policy settings.

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