Last week, the RBA cut the cash rate by 25 basis points taking the rate to an all time low of 1.75%.
The basis for the rate cut has been largely driven by the rising Australian dollar, that was tipped to reach 80 cents this week, had a rate cut not been evoked.
It is clear that other factors extend to lower inflation; not just domestically but internationally.
In fact the overall growth rate round the world at the close of the first quarter of the year, is sub zero – zero in most countries; which equates to negative growth.
Interestingly enough, cash deposits are up and it is likely that the RBA may consider another rate cut in the next few months, largely due to the view that the growth in the market is more likely to return to a more moderate pace and that the labour market results have been quite mixed of late.
Clearly, stimulating growth, the world scene of sub zero growth and finally the need for a strong labour market; has been the overall influence in the decision to drop .25%.
Lynne Wilton, Solid Investment Property