SYDNEY – The Reserve Bank of Australia cut on Tuesday its benchmark interest rate from 1 to a record low of 0.75 percent in the wake of economic uncertainties triggered by the trade war between China and the United States and low domestic consumption.
“Interest rates are very low around the world, and further monetary easing is widely expected, as central banks respond to the persistent downside risks to the global economy and subdued inflation,” RBA Governor Philip Lowe said in a statement.
Lowe highlighted that the yields of long-term government bonds were at a record low in many countries including Australia, while borrowing rates for both businesses and households were also touching their lowest levels in recent years.
The central bank governor said the country’s economy had grown 1.4 percent in the financial year ending in June, a rate which was below expectations.
He, however, predicted that the economy would pick up from here on.
“The main domestic uncertainty continues to be the outlook for consumption, with the sustained period of only modest increases in household disposable income continuing to weigh on consumer spending,” he said.
This is the RBA’s third cut in the interest rate in less than five months. Reductions were earlier announced in June and July.
Concerns over the high unemployment rate – which has remained steady at 5.25 percent in recent months – and low inflation are being seen as other reasons behind the rate cut.
The Australian opposition has criticized the government for not increasing spending in order to boost the economy.