RBA implements second interest rate cut in a month
The Reserve Bank has delivered another interest rate cut, taking the official rate down by 25 basis points to a new record low 1.00 per cent.
Following a month of speculation, the Reserve Bank announced on Tuesday it is lowering the cash rate by 25 basis points to 1.00 per cent following its June reduction, which was the first in three years.
The RBA's decision is aimed at supporting employment growth and providing greater confidence that inflation will be consistent with the medium-term target.
"Today's decision to lower the cash rate will help make further inroads into the spare capacity in the economy," said RBA governor Philip Lowe.
"It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target."
The RBA affirmed it will continue to monitor developments in the labour market closely and adjust monetary policy if needed to support sustainable growth in the economy and the achievement of the inflation target over time.
Mr Lowe confirmed last month that the RBA was likely to implement another rate cut to give the economy room to improve.
Speaking in Adelaide in June, Mr Lowe said "it is not unrealistic to expect a further reduction in the cash rate".
He explained that it would be unrealistic to expect that lowering interest rates by 0.25 of a percentage point will materially shift the path we look to be on.
"The most recent data – including the GDP and labour market data – do not suggest we are making any inroads into the economy's spare capacity. Given this, the possibility of lower interest rates remains on the table," Mr Lowe said at the time.
The governor also called on the government to take further steps to stimulate the economy.
"One option is fiscal policy, including through spending on infrastructure. Another is structural policies that support firms expanding, investing, innovating and employing people. Both of these options need to be kept in mind as the various arms of public policy seek to maximise the economic prosperity of the people of Australia," Mr Lowe added.