Reserve Bank slashes rates to help fight coronavirus outbreak
The Reserve Bank has cut interest rates to a new record low of 0.50 per cent, as it responds to the global coronavirus outbreak.
The RBA has lowered the cash rate by 25 basis points to 0.50 per cent in a bid to help the economy fight off the impacts of the coronavirus.
“The coronavirus has clouded the near-term outlook for the global economy and means that global growth in the first half of 2020 will be lower than earlier expected. Prior to the outbreak, there were signs that the slowdown in the global economy that started in 2018 was coming to an end,” said governor Philip Lowe in delivering the rate cut.
“It is too early to tell how persistent the effects of the coronavirus will be and at what point the global economy will return to an improving path,” he added.
Mr Lowe explained that the global outbreak of the coronavirus is expected to delay progress in Australia towards full employment and the inflation target.
“The board therefore judged that it was appropriate to ease monetary policy further to provide additional support to employment and economic activity.
“It will continue to monitor developments closely and to assess the implications of the coronavirus for the economy. The board is prepared to ease monetary policy further to support the Australian economy,” he said.
Within hours of the RBA’s announcement, the big four followed suit and implemented the rate cut in full.
Westpac, Commonwealth Bank, National Australia Bank and ANZ Bank all moved to provide their mortgage customers with the 25 basis points relief, while Westpac and NAB also passed the cut on to their business customers.
Australia to be hit hard
On Monday, the OECD said that Australia could be one of the countries most affected by the economic fallout of the coronavirus.
The OECD characterised the virus as the greatest danger to the global economy since the global financial crisis, explaining that global growth could tighten to just 1.5 per cent if the virus continues to spread across Europe and North America.
“The adverse impact on confidence, financial markets, the travel sector and disruption to supply chains contributes to the downward revisions in all G20 economies in 2020, particularly ones strongly interconnected to China, such as Japan, Korea and Australia,” the OECD's report reads.
It explained that Australia should look at stimulus measures, including additional precautionary reductions in policy interest rates, to restore confidence and reduce debt-servicing costs.