Australian Rates at 50-year Low

123jump.com Staff
07 Apr, 2009
New York City

Australian stocks declined after the Reserve Bank of Australia lowered rate by 0.25% to 3%. The rates have been cut by half in less than six months as the economy is facing its first recession in twenty years. The record low rates in five decades may have to be lowered more if economy remains weak.

[R]3:00AM New York, 7:00PM Sydney- Reserve Bank of Australia lowers key lending rate to 3%. Rio Tinto offers interim 20% cut for Asian steelmakers.[/R]

Australian market averages dropped after the Reserve Bank of Australia cut its benchmark interest rate the most in 49 years.

In Sydney trading ASX 200 index dropped 1.3% or 50.3 to 3,706.30.

Of the ASX 200 index stocks, 59 gained, 119 declined, and 23 were unchanged. ING Industrial led gainers in the index shares with a rise of 12% followed by Bradken gaining 9%.

Reserve Bank of Australia cut its key lending rate by 0.25% to 3% and the bank estimated that the country is in recession. The governor Glenn Stevens sounded optimistic note that recent stimulus will help contain the degree of recession in the rest of the year.

Australia is battling its first recession since 1991 and interest rates are now at 49 year low.

Reserve Bank of Australia Cuts Key Rate to 3%

Reserve Bank of Australia announced today that it has slashed its key rate by 25 basis points to 3% effective tomorrow and the bank lowered the near term outlook. The RBA cautioned that Australia will avoid the deepest impact of the global recession but the economy will still slow down in the near term.

According to the central bank, global economic stimulus packages will help to diffuse of the economic downturn over the rest of the year, but the """"full effects of which are not yet discernible.""""

The report notes that there are tentative signs of stabilization in countries in China which is the largest customer of Australian exports.

""""Capacity utilisation has fallen from its peak, and will decline further over the rest of the year. With demand for labour weakening, growth in labour costs will probably also fall. Hence inflation over the medium term is likely to be lower than it has been over the past two years. Demand for credit is weak overall, though credit for owner occupied housing is picking up,"""" said the central.

Rio Offers Interim 20% Price Cut for Asians

Bloomberg News reported today that Rio Tinto has offered a temporary 20% price cut to Asian steelmakers as annual contract negotiations stalled.

However Chinese companies, are looking for 40% to 50% discount, are rejecting the smaller discount. Rio has offered a 20% reduction for iron ore fines and 25% for iron ore lump.

Mills are advocating for cuts in benchmark annual prices to $50 a metric ton, while iron ore makers say they can get higher prices selling the material on the spot market.

Gainers & Losers

ING Industrial led gainers in the ASX 200 index shares with a rise of 12% followed by increases in Bradken of 9%, in Hastings Diversified Utilities of 6.7%, in Babcock & Brown of 5.7% and SP Ausnet of 5.5%.

Futuris Corp. led decliners in the ASX 200 index shares with a fall of 15.2% followed by losses in Aquarius Platinum of 13.7%, in Pacific Brands of 13.3%, in Kagara Ltd. of 12.5%, and in PanAust Ltd. of 11.8%.

Commodity stocks shed after crude oil prices dipped 2.9% to $49.60 per barrel. Rio Tinto declined 10% and Mincor Resources fell 9.8%.