The RBA delivered the biggest cut since May 1992 when it announced a 1 per cent reduction in the federal interest rate to 6 per cent. It follows on from a 0.25 per cent cut last month, with the official interest rate now the lowest it has been for two years.
Many were surprised by the scale of yesterday’s reduction, with a 0.5 per cent cut expected by most investors. Printing Industries’ national manager for policy and government affairs, Hagop Tchamkertenian, said the larger-than-expected rate reduction should provide some stimulus to domestic economic activity, or at least arrest the slide in consumer confidence.
“Printing companies will gain directly through a lower refinancing cost,” said Tchamkertenian. “Improved consumer sentiment, particularly in the mortgage belt, should have a positive, direct flow-on to retail spending which will also impact on promotional, advertising and packaging print.”
“I think the RBA saw the danger that a small rate cut of 50 basis points may not have been passed on by the banks and decided instead to go for a much larger rate cut,” he added.
A further 0.25 per cent cut is now expected to be introduced by the RBA before the end of the year.
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