Australia Lowers Rates to 5.25%

123jump.com Staff
04 Nov, 2008
New York City

The larger than expected interest rate but by the Reserve Bank of Australia of 75 basis points to 5.25% only highlighted the vulnerabilities of the Australian economy. The RBA hinted that further rate cuts are possible if the global economic conditions do not stabilize.

[R]3:00AM New York, 7:00PM Sydney – The Reserve Bank of Australia cuts key rate by 75 basis points to 5.25%.[/R]

Australian stocks fell marginally after the aggressive rate cut by the Reserve Bank of Australia stoked speculation conditions on the global financial markets were are still dire.

The RBA lowered its key lending rate by 75 basis points, more than 50 basis points cut expected by the market. Central banks around the world have lowered rates what appears to be a coordinated efforts among the banks. The U.S., China, Japan, Taiwan, Hong Kong and India lowered their lending rates in the last one week.

In Sydney trading ASX 200 fell 0.15% or 6.4 to 4,215.10.

Of the ASX 200 index stocks 78 rose, 103 declined, and 19 were unchanged. Macquarie Office Ltd. led advancers in the index shares with a rise of 40.7%.

Reserve Bank of Australia Cuts Rate to 5.25%

The Reserve Bank of Australia today slashed its base rate by a more-than-forecasted three quarters of a percentage point to 5.25%, effective tomorrow.

The RBA said the deteriorating international financial conditions will dampen the effects of the recent reductions in borrowing costs, a weakening currency and the stimulus plan announced in October.

Spending and economic activity is forecasted to be weaker than earlier projected.

The central bank noted that global stock prices have continued to be volatile and economic growth in China and other emerging markets is slowing.

In the accompanying statement the RBA noted, “Weighing up these international and domestic developments, the Board judged that a further significant reduction in the cash rate was warranted. The Board will continue to monitor developments and make adjustments as needed to promote sustainable growth consistent with achieving the 2–3 per cent inflation target over time.”

The rate reduction is expected to lower monthly loan payments by about A$400 on an average A$300,000 home loan.

CBA to Cut Home Loan Interest Rates by 58 basis points

Commonwealth Bank of Australia Ltd today cut its standard variable home loan interest rate by 58 basis points to 7.7% from 8.3% and lowered its base variable rate to 7.2% from 7.8% effect from November 10. The loan rate cut is lower than 75 basis points rate cut by the RBA.

Australian Dollar Rises

The Australian dollar rose to 66.50 cents against the dollar from 68.23 yesterday.

Gainers & Losers

Macquarie Office led advancers in the ASX 200 index shares with a rise of 40.7% followed by increases of Sundance Resources of 28.8%, in Babcock & Brown of 18.6%, in Harvey Norman of 10.7%, and Sunland Group of 10.6%.

Gold stocks advanced after gold prices increased $8.6 to $726.8 per ounce. Lihir Gold soared 3.5%.

Lynas Corp. led decliners in the ASX 200 index shares with a fall of 12.2% followed by losses in Independence Group of 12.1%, in Macquarie Countrywide of 10%, in Babcock & Brown of 9.2%, and Flight Centre of 7.7%.

Commodity stocks dropped as oil prices declined by $4 to $63.9 per barrel on the economic worries.

Mincor Resources declined 6.5%, Sino Gold Mining shed 6.3%, Atlas Iron dropped 6.2%, and Riversdale Mining fell 4.8%.