The Reserve Bank of Australia (RBA) has announced its decision to cut the official cash rate by 25 basis points, bringing the official cash rate down to 3.25 per cent.

 

In his address, RBA Governor Glenn Stevens said that the decision to cut rates had been made on the back of a diminished global growth outlook, which had softened over the recent months.

 

Mr Stevens also said that falling commodity prices had contributed to the Board’s decision to cut the cash rate, and that the decreasing terms of trade had pushed the RBA to move.

 

Despite the increasingly gloomy global outlook, the RBA found that growth is close to trend, led by large capital investment in the mining sector. Mr Stevens said that consumption growth was also showing signs of strength, but warned that it might only be temporary.

 

“Investment in dwellings has remained subdued, though there have been some tentative signs of improvement, while non-residential building investment has also remained weak,” Mr Stevens said.

 

Mr Stevens also warned that resource investment is expected to peak next year, and that the carbon tax is still effecting parts of the economy.

 

“The introduction of the carbon price is affecting consumer prices in the current quarter, and this will continue over the next couple of quarters,” Mr Stevens said.

 

Low inflation rates and a below average headline CPI also contributed to the Board’s decision to lower the official rate.

 

“The Bank's assessment remains, at this point, that inflation will be consistent with the target over the next one to two years,” Mr Stevens said.