Reserve Bank of Australia cut interest rates to 3%

Reserve Bank of Australia

On its meeting today, the Governing Board of the Reserve Bank of Australia decided to cut the interest rate by 25 basis points to 3.0%, starting from December 5, 2012.

The global economic growth is expected to remain slightly lower than its secondary importance. However, there is a risk of further deterioration due primarily to the situation in Europe, although uncertainty over U.S. fiscal policy also affects the time of economic confidence. Recent data suggest that the U.S. economy has moderate growth, and the economic growth in China has been stabilized.

The mood in the financial markets remain better than it was in the middle of the year, which is result from the signs of progress in resolving Europe’s financial problems, although Europe is likely to remain a source of instability for some time. Long-term interest rates for countries with high credit ratings, including Australia, remain extremely low. Capital markets remain open to corporations and banks with high credit ratings and the Australian Reserve banks have difficulties in access to financing, including unsecured basis. The terms of the loans to large corporations are also attractive, and stock prices have risen since the middle of the year.

In Australia, most of the indicators that have come out before this meeting, show that during the last year the economic growth was close to their averages. Recent data confirm that higher investment in the resource sector could be predicted. Once this happens, there will be more opportunities for increase of demand in other sectors.

Inflation is consistent with medium-term objectives, with key performance indicators at around 2.5%.

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