The Reserve Bank of Australia (RBA) has today acknowledged the Australian economy is slowing more rapidly than forecast, deciding to slash the official cash rate by 25 basis points to a record low of just 1.75 per cent.
It follows ugly stats out last week from the Australian Bureau of Statistics (ABS), showing Australian consumer prices are now falling. In the March quarter, CPI fell 0.2 per cent on the back of weaker clothing and footwear prices (-2.6%), transport (-2.5%), communications (-1.5%), recreation (-1.0) and the all important staple, food and non-alcoholic beverages (-0.2%).
In a statement on today’s monetary policy decision, the central bank noted:
Inflation has been quite low for some time and recent data were unexpectedly low. While the quarterly data contain some temporary factors, these results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.
The big four banks, facing a tick up in bad debts provisions have acted immediately, passing on the full 25 basis points – all except ANZ. ANZ is arguing higher wholesale funding costs have forced it to only pass on 19 basis points. ANZ today announced its cash earnings have plunged 24 per cent to $2.8 billion due to problem loans resulting from low commodity prices.
» Statement by Glenn Stevens, Governor: Monetary Policy Decision – The Reserve Bank of Australia – 3rd May 2016.