SYDNEY: Australia’s central bank cut interest rates to a record low 2.75 percent yesterday as investment in the Asia-driven mining sector hits its peak and the persistently high dollar squeezes local industry.
The Reserve Bank of Australia’s shock decision to slash 25 basis points takes the official cash rate to never-before-seen lows, and is aimed at priming those areas struggling as the economy transforms away from mining.
“With the peak in the level of resources sector investment likely to occur this year, there is scope for other areas of demand to grow more strongly over the next couple of years,” said RBA governor Glenn Stevens.
The Australian dollar slumped to $1.0184 from $1.0238 immediately prior to the bank’s meeting, where it had been widely expected to leave rates on hold at 3.0 percent, reached in December.
Rates have not been this low since the establishment of the reserve bank in 1959.
“Mining investment has been the main driver of growth in recent years, but it is set to start declining within the next couple of quarters,” said Capital Economics analyst Daniel Martin, adding that he expected a further cut before the end of the year.
AFP
