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RBA cuts cash rate again

6 Aug 2013

RBA cuts cash rate to new record low of 2.5%

By Larry Schlesinger
Tuesday, 06 August 2013

The RBA has cut the cash rate by 25 basis points to a new record low of 2.5% following its monthly monetary policy meeting today.

The cash rate is now 50 basis points below the previous official low of 3% reached, following the onset of the GFC, in April 2009.

Prior to this, the previous low was in January 1960 with a 2.89% ‘cash rate’ recorded based on proxy historical RBA data going back to 1959 – the RBA only started publishing official interest rate setting in January 1990.

The rate cut was anticipated by nearly all economists following the RBA sitting on its hands in June and July.

"The pace of borrowing has remained relatively subdued, though recently there are signs of increased demand for finance by households,"the RBA governor Glenn Stevens said in the August monetary statement.

Banks are expected to pass on the rate cut in full though the impact on the housing market is expected to be muted.

The average variable mortgage rate should drop below 5.5% with Canstar reporting an average variable prior to today's decision of 5.71%. RP Data national research director Tim Lawless says today’s reduction in the cash rate comes at a time “when the housing market is already responding to the low debt servicing environment”.

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