The Reserve Bank of Australia cut its benchmark interest rate to the half-century low set during the 2009 global recession, as an elevated currency weakens non-resource industries and discourages hiring.
Governor Glenn Stevens and his board reduced the overnight cash-rate target by a quarter percentage point to three per cent, the central bank said in a statement in Sydney today. The sixth cut in the past 14 months was predicted by 20 of 28 economists surveyed by Bloomberg. The rate matches the level reached from April-October 2009, that was the lowest since 1960.
The decision to ease the highest policy rate among major developed economies reflects Australia’s contained wage pressure and lower projected mining spending, as well as an unemployment rate at a two-and-a-half year high. The RBA is seeking to rebalance a so- called two-speed economy, in which mining regions in the north and west thrive and builders and manufacturers in the south and east struggle.
“Even though global conditions have stabilised, the effect of the previous global slowdown is still flowing through to Australia, with local employment weak, wages growth easing and investment intentions for 2012-13 declining,” said Paul Bloxham, chief economist for HSBC Holdings Plc here and a former RBA official.
The local dollar’s 60 per cent climb in the past four years has hurt companies. The number of Australian construction jobs fell by 70,200 to 978,000 in the 12 months through August, helping lift the unemployment rate to 5.4 per cent. Mining employment gained by 44,600 over the same period to 271,000, according to government figures.