Rate cuts designed to kick-start non-mining sectors

Rate cuts designed to kick-start non-mining sectors

Posted on Tuesday, December 18 2012 at 4:27 PM

The motivator behind the Reserve Bank’s decision to cut rates earlier this month was continued sluggishness in non-mining industries.

Minutes from the December meeting released
today show the central bank’s board is making a concerted effort to jumpstart
sectors like housing construction and retail.

The official cash rate was slashed by 25
basis points to three per cent; only the second time in history it has reached
this point.

China’s economy looks to have stabilised
and the US economy continues to grow at a reasonable pace, the board was told.

The meeting also heard that inflation looks
set to remain low and contained.

“At the meeting, the information on labour costs
and softening labour market conditions suggested the inflation outlook still
afforded the board some scope to provide additional support to demand,”
the minutes say.

Economists have tipped further rate cuts throughout
2013, with the ANZ going as far as tipping reductions of up to one per cent.

The next meeting of the board will take
place in February.

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