"This easing of monetary policy will support employment growth and provide greater confidence that inflation will be consistent with the medium-term target," Reserve Bank Governor Philip Lowe said in a statement.
The Reserve Bank of Australia this afternoon cut official interest rate to a record low of 1 per cent as it tries again to boost the economy.
Following its monthly board meeting held in Darwin, the first time it has met in the Northern Territory capital since 1968, Lowe said the bank would slice the cash rate by 0.25 percentage points for a second consecutive month.
At its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.00 per cent – https://t.co/xqdLgLZ4kN
— RBA (@RBAInfo) July 2, 2019
“This easing of monetary policy will support employment growth and provide greater confidence that inflation will be consistent with the medium-term target,” Reserve Bank Governor Philip Lowe said in a statement.
The 0.25 per cent drop if passed on in full by lenders will deliver borrowers with a $300,000 30-year owner occupier loan paying principal and interest a saving of A$44 per month. This will lower their monthly repayments to $1,413 based on a mortgage with the average variable rate of 4.14 per cent falling to just 3.89 per cent. Borrowers with a $600,000 mortgage will save $86 per month and have their monthly repayments cut to $2,827.
It is the first back-to-back cut in interest rates since 2012. Last month only two of the big four banks passed the interest rate in full – the Commonwealth Bank and National Australia Bank.
Lowe said the economy had grown below trend over the past year, with household consumption “weighed down by a protracted period of low-income growth and declining housing prices”.
While employment growth had been strong, there had been little inroads made into the economy’s spare capacity, which meant overall wages growth “remains low”.
“A further gradual lift in wages growth is still expected and this would be a welcome development,” he said.
“Taken together, these labour market outcomes suggest that the Australian economy can sustain lower rates of unemployment and underemployment.”
Lowe said there were some tentative signs that house prices in Sydney and Melbourne had stabilised, pointing out that mortgage rates were now at record lows.
“The Board will continue to monitor developments in the labour market closely and adjust monetary policy if needed to support sustainable growth in the economy and the achievement of the inflation target over time,” he said, pointing to possible further cuts.