The Reserve Bank has cut the official interest rate by 25 basis points to 2.5%, in line with economists’ expectations.
The cut was largely expected due to downbeat economic data, including poor retail sales and an economic statement from the government which predicted more modest growth.
In a statement, governor Glenn Stevens said although financial conditions remain “accommodative”, the local economy has been growing below trend.
“This is expected to continue in the near term as the economy adjusts to lower levels of mining investment. The unemployment rate has edged higher. “
“Recent data confirm that inflation has been consistent with the medium-term target. With growth in labour costs moderating, this is expected to remain the case over the next one to two years, even with the effects of the recent depreciation of the exchange rate.”
The dollar is also expected to drop more, Stevens said, which should help a “rebalancing” of the economy.
“At today’s meeting, and taking account of recent information on prices and activity, the Board judged that a further decline in the cash rate was appropriate.”