(Australian Associated Press)
The Reserve Bank of Australia has cut the cash rate to a new record low of 0.5 per cent as it acts to soften the economic impact of the coronavirus.
Pricing for the 25 basis point rate cut advanced from an outside chance last week to a foregone conclusion on Tuesday following a torrid weekend for a coronavirus-rattled economy.
RBA governor Philip Lowe said the easing from 0.75 per cent comes ahead of a worse-than-expected near term virus hit to the economy.
Dr Lowe said his previous forecast of a “gentle turning point” in the Australian economy was now under a cloud.
“Prior to the outbreak, there were signs that the slowdown in the global economy that started in 2018 was coming to an end,” Dr Lowe said in his address after the bank’s March board meeting.
“It is too early to tell how persistent the effects of the coronavirus will be and at what point the global economy will return to an improving path.”
Dr Lowe said the RBA board remains prepared to ease monetary policy further.
Westpac was the first of the big banks out the door on Tuesday and immediately announced it would pass on the full 0.25 per cent reduction in variable interest rates for home loans, as well as small business cash-based loans and overdrafts.
Prime Minister Scott Morrison had earlier said he expected the banks to “do the right thing” by consumers and pass on any rate cut in full.
Australia’s interest rate had already been lowered three times to 0.75 per cent last year in a bid to kickstart an economy that was sluggish even before the summer’s bushfires and coronavirus threat came into play.
The Australian dollar rose to 65.52 US cents, from 65.28 US cents, immediately after the 1430 AEDT decision.