BREAKING NEWS: RBA cuts rates by 0.25%

Mortgagees and home owners can finally breathe a sigh of relief, with the RBA cutting the official interest rate by 0.25%, from 7.25% to 7%.

Mortgagees and home owners can finally breathe a sigh of relief, with the RBA cutting the official interest rate by 0.25%, from 7.25% to 7%.

It is the first rate cut in seven years. There have been 12 successive rate increases since the RBA lifted rates by 0.25% in March 2002.

RBA governor Glenn Stevens said in a statement that there clear signs of a slowdown for both households and businesses.

“On balance…it is looking more likely that household demand will remain subdued and overall economic growth slow over the period ahead. Inflation is likely to remain relatively high in the short term, with the CPI affected by the high global oil prices in mid year and other increases in raw materials prices.

“But looking further ahead, the outlook for demand suggests that inflation in both CPI and underlying terms is likely to decline over time, provided wages growth remains contained. The Bank’s forecast remains that inflation will fall below 3 per cent during 2010.”

While the news of a rate cut will be welcomed by borrowers, business operators will no doubt feel a little disappointed.

A SmartCompany poll revealed entrepreneurs had been hoping for a cut of 0.5% to ease the pressure on their companies.

Almost 90% of respondents said higher interest rates had negatively affected their business, with one third admitting they had cut staff and 60% saying they had postponed investment decisions as a result of higher rates.