Today’s interest rate cut is good news for families and small businesses. Importantly, it will help further stimulate economic growth and create more jobs.
Now is the time for Australian businesses and households to borrow and invest.
The Reserve Bank of Australia (RBA) cut in the official cash rate by 25 basis points – from 2.25 per cent to a record low of 2 per cent is on top of the previous rate cut of 25 basis points in February.
In announcing today’s interest rate cut, the RBA Governor acknowledges the recent encouraging trends in household demand and employment growth.
He also acknowledges that even with a lower exchange rate, inflation is likely to remain low.
While interest rate decisions are solely a matter for the RBA, today’s decision underscores the importance of monetary and fiscal policy working hand in hand to support the Australian economy.
The Budget in one week’s time will be appropriate for these times.
The economic objectives of the Budget and the recent decisions of the Reserve Bank will work together to further strengthen the Australian economy.
The combined 50 basis point cut in interest rates will put an extra $1,500 into the pockets of a typical Australian family with a mortgage of $300,000 this year.
We are mindful of the impact on self-funded retirees and those who rely on returns from savings for their income. Savers around the world are facing the dilemma of lower interest rates and lower returns.
I want to reassure self-funded retirees that in the upcoming Budget there will be no tax increase on their superannuation. This is in stark contrast to the Labor Party which wants to impose new taxes on already pressured retirees.
Rather than increase taxes, the Government is focused on lowering cost of living pressures. For example the abolition of the carbon tax has led to significantly lower electricity prices.
Low interest rates are also good for businesses seeking to finance new investment.
We are seeing the benefits of lower interest rates flow through in record housing construction, with residential building approvals now 24 per cent higher than a year ago.
We encourage business to go out and spend on productive investments.
Small business in particular should take advantage of record low interest rates.
I again urge the banks to immediately pass on this rate cut – across their customer base – including to credit card holders, mortgage holders and small businesses.