Australia cuts interest rates to 3.25%
The Reserve Bank of Australia cut its benchmark interest rate to the lowest level since 2009 as a global slowdown weakens commodity prices that have helped drive 21 years of growth without a recession.
Governor Glenn Stevens and his board lowered the overnight cash-rate target by a quarter percentage point to 3.25 per cent, the central bank said in a statement in Sydney today.
Prices of the nation's key exports, iron ore and coal, have declined in recent months as Europe's fiscal crisis weighs on global growth and Chinese demand.
Mr Stevens's decision to add to rate reductions in May and June reflects signs of weakness in the labour market, subdued inflation and a slowdown in consumer spending.
"The case for more expansionary monetary policy conditions is compelling," Bill Evans, chief economist at Westpac Banking in Sydney, said before the decision.
"A loss of momentum in the domestic economy," a weaker global backdrop and the currency's sustained strength are among the factors, he said.
The local dollar has remained above parity with its US counterpart for all but 23 days this year.
It traded at $1.0370 at 2.25 pm in Sydney, about 40 per cent higher than the average since exchange controls were scrapped in 1983.
Since the RBA's September 4 meeting, government data indicated a weaker economy: growth slowed in the second quarter to 0.6 per cent from 1.4 per cent in the first three months of the year; employers unexpectedly cut payrolls in August; the nation recorded a wider-than-expected trade deficit in July; and business confidence declined.
A quarter of Australia's exports, making up about 5 per cent of gross domestic product, goes to China, and 60 per cent of those shipments are iron ore.