RBA rate cuts slowing
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Glenn Stevens has signalled the RBA will carefully consider future cuts in response to the stimulus package of the Government and recent RBA cuts that have lowered rates dramatically over recent months.
Economic forecasters are still expecting rates to drop to around 2.00% from the current 3.25% but future cuts will not be made unless economic conditions clearly deteriorate further. This is something Glenn Stevens indicated in his address in response to the global economic conditions affecting the world.
Australia is stil well placed comparative to other nations currently but a substantial decline in conditions cannot be underestimated and the RBA seem focused to respond quickly should the economy continue to falter.
Commonwealth Bank and NAB pass on rates in full
The Commonwealth Bank and NAB have passed on the rate cut in full after the RBA rate cut today where the Reserve Bank cut rates by 100 basis points.
Both banks have benefited from banking inflows which have made the task of providing the full rate easier than their competitors the ANZ Bank and Westpac.
The Commonwealth Bank announced they will pass their rate cuts onto new and existing customers from 12 December 2008.
RBA cut by 100 basis points
The Reserve Bank of Australia today announced a cut to the RBA interest rate of 100 basis points to 4.25%.
The rate cut reduces the RBA rate to it’s lowest level since December 2001. The RBA Chief Glenn Stevens indicated that more cuts are likely but they are unlikely to be in the range of recent cuts more along the lines of the traditional rate cuts of 0,25% to 0.50%.
The Commonwealth Bank, National Australia Bank and Westpac all reacted swiftly by cutting rates. The full rate cut was passed on my the Commonwealth Bank and the National Australia Bank but Westpac only passed on 0.80%.
RBA Minutes of Monetary Policy for November 2008
The Reserve Bank of Australia released it’s minutes from it’s monetary policy meeting on 4 November 2008 today.
These minutes always make for interesting reading but even more so at a time when the economic environment is as dire as it is today.
Click on RBA to read the minutes from the Melbourne Cup day meeting when interest rates were cut.
RBA look to another 1% cut in December
The RBA will almost certainly cut rates again by 100 basis points or more after economic data from Australia and around the world is pointing to a global recession.
Last night Europe announced that the 15 countries that make up the Eurozone has fallen into recession amid worsening economic conditions.
A day earlier the economic powerhouse of Germany announced they had fallen into recession amid the global crisis of confidence affecting markets.
The fear of ongoing job cuts around the world driven by corporate cutbacks is now widespread with acute pain being visable throughout Europe and the US. The fear and panic their has spread to other regions and Australia may be heading down the same path.
Australian markets have been savaged over the last six months and consumers have stopped spending hoarding available cash in case of job cuts or harder economic times ahead.
This fear will force the RBA into another major rates cut in December that could see 100 basis points cut from the official rate to 4.25%. More cuts will follow next year as the economy is expected to experience a very tough 2009 amid corporate job cuts and record low consumer confidence.
How big do you the December rate cut will be? Add your comment today.
NAB Business Survey reveals business confidence at record lows
Australian business confidence continued to fall in October as fears of a growing global recession impacted heavily upon the outlook of the domestic economy.
The monthly National Austalia Bank business survey revealed that confidence fell 21 points to minus 29, the lowest level since the survey began in 1997.
The survey which showed a fall in confidence across all major sectors indicates that falls on stockmarkets and the prevailing negativity in the press regarding the global economy have finally taken their toll on business confidence.
NAB indicated their expectation that the Reserve Bank wil cut rates by another 75 basis points in December and a further 75 basis point cut in the first three months of 2009. This would take the RBA cash rate to 3.75%.
RBA cut growth forecast to 1.5%
The RBA today announced a cut to the growth forecast to the end of December of 1.5%, this is down from the IMF forecast of 1.8% and the 2% forecast only in August.
The RBA announcement was in the November Statement of Monetary Policy. The RBA also forecast a drop in the inflation rate to 3% by the middle of next year.
It would seem the RBA statement further vindicates future cuts to the RBA rate. The interbank futures are already factoring in a forecast RBA rate of around 4% and various investment bankers expect the RBA rate to fall to 4% by the middle of next year.
RBA cut rate by 0.75%
The RBA announced yesterday a cut of 75 basis points to the Reserve Bank Rate to 0.75% effective from 5th November 2008.
The RBA rate has not been at this level since December 2003.
Citing the weakness in the domestic economy and the ongoing fall in the Australian dollar the decision to cut the rate by a greater than expected amount was seen to be prudent to support the faltering domestic economy.
The RBA Media Release can be viewed on here.