Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
The Reserve Bank of Australia has cut the cash rate to a record low 0.1 per cent from 0.25 per cent at its monthly board meeting.
In its first monetary policy easing since March, the board also agreed to similar reductions for other measures to keep market interest rates and funding costs low across the economy.
“With Australia facing a period of high unemployment, the Reserve Bank is committed to doing what it can to support the creation of jobs,” Reserve Bank governor Philip Lowe said in his post-meeting statement on Tuesday.
However, he believes the economic recovery is under way in Australia and positive economic growth is now expected in the September quarter, despite the restrictions in Victoria.
If the rate cut is passed on in full by the banks, the average monthly saving could be around $33 a month on a $400,000 loan for an owner occupier paying principal and interest.
The central bank also reduced its three-year bond yield target rate and its term funding facility rate for banks to 0.10 per cent from 0.25 per cent.
The Reserve Bank has also introduced a $100 billion bond program for five to 10 year maturities.
“The combination of the RBA’s bond purchases and lower interest rates across the yield curve will assist the recovery by; lowering financing costs for borrowers; contributing to a lower exchange rate than otherwise; and supporting asset prices and balance sheets,” Dr Lowe said.
The reduction in the cash rate is the first since March this year, when it was reduced twice in the month, the second coming at a special board meeting at the onset of the pandemic.