Australia central bank slashes interest rates to 3.25 percent
By Amy Coopes, AFP
October 3, 2012, 11:58 am TWN
SYDNEY -- Australia's central bank on Tuesday cut interest rates to 3.25 percent, their lowest level since the global financial crisis, warning that the growth outlook for next year had weakened.
The Reserve Bank of Australia slashed 25 basis points off the cash rate, taking it to lows not seen since October 2009, when it first resumed hiking them following the world downturn.
Governor Glenn Stevens said global weakness was weighing on the outlook, with Europe contracting and the United States only seeing modest growth.
“The outlook for growth in the world economy has softened over recent months, with estimates for global GDP being edged down, and risks to the outlook still seen to be on the downside,” he said in a statement.
“Growth in China has also slowed, and uncertainty about near-term prospects is greater than it was some months ago.”
The Australian dollar slumped about half a U.S. cent on the surprise cut, to US$1.0320 from US$1.0369.
Treasurer Wayne Swan stressed Australia's strong economic fundamentals following the bank's downbeat assessment and said top trading partner China remained robust despite a recent cooling.
“Whilst China may be growing a little more slowly than people had anticipated, it's doing it from a very much bigger base,” Swan told reporters.
China was now 40 percent larger than it had been before the financial crisis, meaning that growth of seven or eight percent remained “substantial, added Swan.