Reserve Bank cuts interest rate to 3.5%

The Reserve Bank of Australia (RBA) has cut its benchmark interest rate by a quarter percentage point to the lowest since 2009 as Europe’s debt crisis and slower Chinese growth overshadowed a stronger domestic labour market

Bank governor Glenn Stevens and his board lowered the overnight cash rate target to 3.5 per cent, the RBA said in a statement in Sydney yesterday.

“Europe’s economic and financial prospects have again been clouded by weakening growth, heightened political uncertainty and concerns about fiscal sustainability and the strength of some banks,” Mr Stevens said. In Asia, “the ongoing trend is unclear and could be dampened by slower Chinese growth”.

Local currency and stocks maintained earlier advances after Mr Stevens’s second rate reduction in as many meetings.

Australia’s economy is giving mixed signals, with the unemployment rate at a one- year low of 4.9 per cent and an investment pipeline worth almost A$500 billion (€391 billion) driving growth in some regions, even as export prices have slumped, building approvals dropped and retail sales weakened.