The Reserve Bank of Australia (RBA) has this morning dropped the official cash rate by 50 basis points (0.5%) to 5.75%, due largely to declining business confidence, the low inflation rate and deteriorating global economic conditions.
RBA governor Ian MacFarlane says a fourth consideration was that despite apparent areas of short-term weakness, the economy is still showing "considerable resilience".
"The Board judged that the balance of risks to the outlook over the next year had changed sufficiently to warrant a shift in the stance of monetary policy," he says.
"With a weaker external environment in prospect, and with inflation contained, policy settings more supportive of domestic demand are now prudent.
"By keeping monetary policy attuned to the changing internal and external circumstances facing the economy, today's change in interest rates will assist in maintaining sustainable growth with low inflation."
Westpac and its regional subsidiaries Bank of Melbourne and Challenge Bank have
moved quickly to pass on the full 0.5% cut in official interest rates to business customers. To read more, go to
bizreview.
The governor's full statement is available
here.
For business and industry groups' responses to the interest rate drop, visit
bizreview throughout the day.