Currency Depreciation not enough to Spur the Economy as the RBA cuts rates by 25 points
In a move which comes with little surprise – the RBA has acted to give Australian consumers and borrowers something to cheer about by lowering the official cash rate by 0.25% bringing the official rate to 2.5%. Prior to this afternoon’s announcement – 94% of economic analysts were predicting a 94% chance of a 0.25% rate cut.
Inflation growth remained below the midpoint of the 2-3 percent target range of the RBA in figures released last week meaning that a decrease in the cash rate should serve to see some growth in both consumption and prices in the coming quarter. However, most analysts predict further action to come before the end of the year with unemployment also at its highest since 2009 at 5.7%.
In addition, despite a slide in the AUD exchange rate – declining 9.7% in trade-weighted terms this year – it is now heading for the biggest annual decline since 2008. Recent depreciation of the Aussie Dollar should help to boost preferences for local goods over imports, stimulating our local growth data