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RBA cuts interest rates 'for the fist time in 7 years'

RBA cuts interest rates 'for the fist time in 7 years'

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Date Published : Wednesday, September 03, 2008

The Reserve Bank of Australia (RBA) has announced it will lower the official interest rate by 25 basis points to seven per cent, effective from September 3rd.

According to the Australian, the last time the RBA reduced interest rates it did so in quick succession and cut rates by a total of 1.25 percentage points in just three months.

It also reported that the lowering of rates will reduce the repayments on an average $300,000 mortgage by just over $50 a month.

In the statement by RBA governor Glenn Stevens, he said indicators of household spending have recorded subdued outcomes over recent months and growth in production had also slowed.

After weighing up available domestic and international information, the governor said it was judged that there was now "scope for monetary policy to become less restrictive".

The newspaper quoted prime minister Kevin Rudd as stating that the first interest rate cut in seven years "will provide some modest relief to mortgage holders right across Australia".

Mr Rudd added: "The government knows that there is still much, much more to be done in helping Australian families dealing with cost-of-living pressures."

The prime minister also said that because interest rates took such a long time to rise, they will take a "long time to come back down".

However, of the seven million households in Australia, only 2.5 million will benefit directly from the RBA decision, the Age said.

Citing data from the 2006 census, the newspaper claimed that two million Australians are renting properties while a further 2.5 million do not own any money on their home.

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