Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  News

News

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesHot NewsMost Read NewsRecomm.Business LeadersCalendar 

RBA Cuts Interest Rates to 3-Year Low

share with twitter share with LinkedIn share with facebook
share via e-mail
0
12/04/2012 | 05:06am CEST

--Central bank cuts interest rates to 3-year low

--Treasurer Swan warns on slower economic growth

--RBA 'battling' to stay ahead of mining slowdown-economists

SYDNEY--Australia's central bank cut interest rates by a quarter of a percentage point to 3.0%, matching a low hit in the aftermath of the global financial crisis, as a fading mining boom weighs on the resource-rich economy.

The Reserve Bank of Australia is attempting to rekindle demand in weaker sectors of the economy like retail and manufacturing as a boom in mining investment that has powered growth in recent times rapidly loses steam.

"Looking ahead, recent data confirm that the peak in resource investment is approaching," RBA Governor Glenn Stevens said Tuesday following a gathering of the bank's policy setting board in Sydney. The outlook for investment outside of the mining sector remains "relatively subdued," he added.

Australia's economy has been hit by sharp falls in industrial commodity prices, prompting mining companies to shutter sites and collectively shed thousands of workers. At the same time, an uncertain global outlook has meant consumers have been slow to respond to a yearlong campaign of interest rate cuts now totaling 1.75 percentage points.

"The trouble is the peak of the mining boom is coming earlier and faster than expected, at a time when the rest of the economy--housing, retailing, manufacturing and tourism--is still struggling," said Shane Oliver, chief economist at AMP Capital Investors. The RBA is "battling to get ahead of the slowdown," he added.

New figures Tuesday show building approvals for new houses and apartments fell a seasonally adjusted 7.6% in October from a month earlier, in spite of a surprise rate cut that month. House prices across eight capital cities were 0.1% lower in November than a year earlier, a private-sector survey Monday showed. Retail sales were flat in October, the latest official numbers, a tepid start to the important Christmas trading season.

Policymakers are concerned about the strong Australian dollar, which is trading up 8% since hitting its year-low in June, acting as a drag on certain areas of the economy such as tourism and manufacturing. The currency is also blamed by energy and mining companies for adding to development costs and undermining the competitiveness of Australia's crucial resource exports.

The economy likely grew at an annualized pace of 3.1% in the three months through September, according to economists surveyed by Dow Jones Newswires, slowing from 3.7% in the year through June. Official gross domestic product growth figures are due on Wednesday.

"I wouldn't be surprised if we saw a slight moderation in growth," Treasurer Wayne Swan told reporters after the RBA decision. "We do have global economic head winds and we have a high dollar, and they are clearly impacting on our economy," he added.

Economists had expected the RBA to cut interest rates Tuesday. But the absence of any commentary from the RBA on the likely future direction for rates sent the Australian dollar higher after the decision to US$1.0444 from US$1.0421 before.

Some traders interpreted Tuesday's statement as signaling the latest cut was the last for some time. Last month, the RBA held rates steady, but left the door ajar for further cuts by saying its policy stance was appropriate only for the "time being".

The RBA board won't meet again until February. That is a long hiatus for financial markets to stew over future policy, especially given the economic uncertainty in Europe, and tense political negotiations in the U.S. over how to design a deficit-reduction package.

"We can't rule out another rate cut in February if U.S. budget negotiations are still dragging on, creating the risk of a U.S. recession and a weaker global economy," said Craig James, chief economist at Commonwealth Securities.

Although the RBA's benchmark lending rate is at its lowest level since September 2009, higher funding costs stemming from the financial crisis mean commercial banks are reluctant to pass on any official interest rate cuts in full, dampening consumers' appetite for credit.

The jobs market is also softening, with the unemployment rate expected to tick up to 5.5% in November from 5.4% in October, according to economists. Official jobs figures are due on Thursday.

Write to Enda Curran at enda.curran@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news
Date Title
07:45p SIERRA CLUB : Nearly 90,000 Speak Out Against Alberta Clipper Pipeline
07:45p NERC  NORTH AMERICAN ELECTRIC RELIABILITY : Sixth Annual Human Performance Conference and Workshops Begin in Atlanta
07:45p ELECTRIC SHAVERS - GLOBAL STRATEGIC BUSINESS REPORT 2017-2022 : Leading Players are Braun, Panasonic, Philips/Norelco, Spectrum Brands - Research and Markets
07:44p Rosen Law Firm Announces Filing of Securities Class Action Lawsuit Against Adeptus Health Inc. – ADPT
07:44p CITY OF HOPE : Researchers Present New Findings at 2017 American Association for Cancer Research Annual Meeting
07:43p INVESTOR ALERT : Kaplan Fox Announces Investigation of FTD Companies, Inc.
07:43p JBS SA LOSS NOTICE : Rosen Law Firm Reminds JBS S.A. Investors of Important Lead Plaintiff Deadline in First Class Action Filed by Firm - JBSAY
07:41p MIDWEST ENERGY EMISSIONS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)
07:41p ARROW ELECTRONICS : rsquo; SAM Car Ranked Top Car Innovation of 2016
07:41p GREENPOWER MOTOR : Commences trading on the OTCQX
Latest news
Advertisement
Hot News 
-16.15%RESILUX : Bain Capital walks away from Resilux deal after German anti-trust ruling
-66.46%OCEAN RIG UDW : Files for U.S. Bankruptcy Protection
-5.88%DOMACOM (ASX : DCL) talks its property platform and new partnerships
0.94%Bharti Airtel sells 10 percent stake in tower unit to KKR, Canada Pension
5.06%WOLSELEY : to change name to U.S. brand Ferguson, reflecting regional focus
Most Read News
08:14a Dollar steadies as markets look beyond Trump's policy stumble
12:47a CHINA PETROLEUM & CHEMICAL : Saudi Arabia sweetens huge Aramco IPO with tax cut
11:56a SAMSUNG ELECTRONICS : With new phone due, Samsung dials down on safety message
09:19a Ericsson's provisions raise concern over health of business
12:51p TSX climbs to 11-day high as oil rallies
Most recommended articles
03/27 Dollar hits four-month low as Trump trade deflates
03/21 UK to investigate any UK banking involvement in 'Laundromat' case
01:28p TOSHIBA'S WESTINGHOUSE TO FILE FOR U.S. BANKRUPTCY TUESDAY : sources
01:26p Consumer confidence hits 16-year high in boost to economy
01:23p WELLS FARGO : failed test of community lending, bank says