Reserve Bank Slashes Interest Rates Again As Coronavirus Fears Batter Economy
Official interest rates have been cut to another historic low of just half a percent, as fears about coronavirus bruise the Australian economy and stock market.
The Reserve Bank of Australia announced its rates decision on Tuesday afternoon, cutting the official cash rate from 0.75 percent to 0.5.
It comes as the Australian Stock Exchange dropped nearly 10 percent last week -- the largest weekly dip since the 2008 global financial crisis -- including 3.3 percent on Friday alone, the biggest single-day fall since 2015.
Global uncertainty over the impact of coronavirus was blamed for the stock market tumble.
"The Board took this decision to support the economy as it responds to the global coronavirus outbreak," the RBA's governor, Philip Lowe, said in a statement.
Lowe said the virus had "clouded the near-term outlook for the global economy" and warned global economic growth would be "lower than earlier expected" in the first half of the year.
"It is too early to tell how persistent the effects of the coronavirus will be and at what point the global economy will return to an improving path," Lowe said.
Prior to the RBA announcement, Prime Minister Scott Morrison told a Tuesday press conference he expected Australia's big banks to pass on the rate cut to customers. He said he wanted banks "come to the table and to do their bit in supporting Australians as we go through the impact of the coronavirus" and said he would "applaud" people who had gone searching for a better bank deal.
Westpac, Commonwealth and St George quickly announced they would be passing on the cut in full to many customers.
"The coronavirus outbreak overseas is having a significant effect on the Australian economy at present, particularly in the education and travel sectors," Lowe said.
"The uncertainty that it is creating is also likely to affect domestic spending. As a result, GDP growth in the March quarter is likely to be noticeably weaker than earlier expected."
Lowe said the RBA decided on the rate cut in hopes of providing "additional support to employment and economic activity", and said further rate cuts could happen in future to support the economy.
Morrison had earlier on Tuesday flagged that the federal treasury department was finalising plans for an economic stimulus in the face of the virus outbreak, and the impact it was having on Australia's finances.
Already the government has pointed to the coronavirus, as well as the bushfire crisis, as potentially derailing its plans to deliver a budget surplus in April.
"This is a health crisis which has had serious disruptive impact on the movement of people, and of goods around the world," he said.
"That obviously disrupts supply chains and has a suppressing impact on demand. And what we are focusing on is jobs, cash flow, and investment."
More to come.