This week’s Reserve Bank interest rate cut to a record low of 0.1 per cent has been greeted positively by business groups in Australia who say while risky, it will reduce the costs of investment and help boost domestic consumption.

The other key reason why the Reserve Bank opted to slash rates to levels never expected is to keep the Australian dollar in check as this will benefit exporters and import-competing industries, like print.

The rate is also not expected to rise for at least three years.

In a further benefit for the economy, the Reserve Bank said it would buy $100 billion in Australian government bonds over the next six months to lift inflation and encourage lending and investment.

Ai Group chief executive officer Innes Willox said the interest rate cut will reinforce the stimulatory impacts in the already announced tax cuts, write-off provisions and the continued direct payments to households and businesses.

“While not without some risks, today’s further easing of monetary policy by the Reserve Bank is a welcome move that will reduce the costs of investing and help boost domestic consumption,” Willox said.

“The decision comes as domestic conditions appear to be gradually improving but with uncertainty again on the rise as many of the world’s major economies restrain activity in the face of further COVID-19 waves.”

Willox said a rapid deployment of infrastructure spending will now be needed to help further boost the economy.

“Any remaining stimulus will be almost totally dependent on fiscal policy measures including through the rapid deployment of infrastructure spending. The federal, state and territory Governments will need to be ready to take further action if it is necessary,” Willox said.

“Monetary and fiscal stimulus, while critical to the pace of recovery in activity and jobs over coming months, will need to be backed up with more fundamental changes to the effectiveness of the domestic economy.

“A new program of measures should prioritise the development of our workforce and business capabilities; the rejuvenation of workplace productivity; encouraging innovation and investment; and providing clarity, certainty and stability to energy and climate policy.”

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