RBA cut the official cash rate to 3 percent
Borrowers have been given an early dose of Christmas cheer with the Reserve Bank delivering a 0.25 percent rate cut at its December board meeting.
In a move widely tipped by economists, the RBA cut the official cash rate to 3 percent at its last board meeting until February 2013.
The move brings the official rate to its lowest level since the global financial crisis when the board introduced emergency measures to stimulate the economy.
It matches the rate introduced in April 2009 in the depths of the GFC.
It is the fifth time since November last year that the RBA has cut the cash rate with a total of 1.75 percent slashed from the benchmark in just over 13 months.
Reserve Bank governor Glenn Stevens said the effect of earlier rate cuts was yet to be seen in the economy.
"The Board judged at today's meeting that a further easing in the stance of monetary policy was appropriate now," Mr Stevens said in a statement.
"This will help to foster sustainable growth in demand and inflation outcomes consistent with the target over time."
The RBA has drawn criticism in recent days for keeping rates on hold at its November 6 Melbourne Cup day board meeting.
Earlier today, Premier Investments chairman Solomon Lew called on the central bank to cut the official interest rate by 0.5 per cent to stimulate the economy and boost consumer confidence.
Recent data has revealed a slowdown in planned mining activity, plus continued weakness in the housing, manufacturing and retail sectors.
The rate cut should help consumers loosen their wallets ahead of Christmas but it remains to be seen how much of the savings the big banks will pass on to their customers.
Prime Minister Julia Gillard is urging the banks to pass on the rate cut in full.
"The banks should certainly pass on in full any interest rate reduction if it is made," Ms Gillard told reporters in Melbourne.
"It's very close to Christmas ... we want to see families benefit from any interest rate reduction that flows today."
The banks, though, are signalling a full rate cut is not on the cards.
The Australian Banker's Association said the Reserve Bank did not expect banks and other lenders to exactly match every cash rate movement.
"The Reserve Bank board takes into account what borrowers are actually paying in the marketplace for loans and what they are receiving on deposits when making their decision," chief executive Steven Munchenberg said.
RateCity spokeswoman Michelle Hutchison said borrowers with a typical $300,000 mortgage could expect to save about $40 in monthly repayments from next month as most lenders were likely to pass on 20 basis points.
“But there’s a significant difference between what lenders will pass on and the interest rates they offer,” he said.
“For instance, following the last rate cut in October, lenders passed on between 4 and 25 basis points according to RateCity.
“Variable interest rates range from 5.4 percent up to 7.2 percent, which is worth about $352 in extra monthly repayments for a $300,000 home loan (over 30 years).”
Ms Hutchison said mortgage holders willing to spend time over Christmas shopping around stood to save thousands of dollars.
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