The Reserve Bank of Australia cut its benchmark interest rate to the half-century low set during the 2009 global recession as hiring falters and an elevated currency hurts industries such as manufacturing and tourism.
Governor Glenn Stevens and his board reduced the overnight cash-rate target by a quarter percentage point to 3 percent, the central bank said in a statement in Sydney today. The sixth cut in the past 14 months was predicted by 20 of 28 economists surveyed by Bloomberg. The rate matches the level reached from April-October 2009 that was the lowest since 1960.
In his statement, Stevens said the local dollar remains “higher than might have been expected” given lower export prices and a weaker global outlook. His decision to ease the highest policy rate among major developed economies reflects Australia’s contained wage pressure, lower projected mining spending and an unemployment rate at a 2 1/2-year high.
“The near-term outlook for non-residential building investment, and investment generally outside the resources sector, remains relatively subdued,” Stevens said. “Looking further ahead, with the labor market softening somewhat and unemployment edging higher, conditions are working to contain pressure on labor costs.”
The so-called Aussie advanced, buying $1.0448 at 2:45 p.m. in Sydney compared with $1.0426 before the decision.