At it's meeting today, the board of the Reserve Bank of Australia have announced a drop in the cash rate by 25 basis points to 1.25%, a new record low.

In a statement from Reserve Bank of Australia Governor Philip Lowe, it confirms "the Board took this decision to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target".

• The outlook for the global economy remains reasonable, although the downside risks stemming from the trade disputes have increased. Growth in international trade remains weak and the increased uncertainty is affecting investment intentions in a number of countries.
• Global financial conditions remain accommodative. Long-term bond yields and risk premiums are low. In Australia, long-term bond yields are at historically low levels.
• Employment growth has been strong over the past year, labour force participation has been increasing, the vacancy rate remains high and there are reports of skills shortages in some areas.
• The adjustment in established housing markets is continuing, after the earlier large run-up in prices in some cities. Conditions remain soft, although in some markets the rate of price decline has slowed and auction clearance rates have increased.

Today's decision to lower the cash rate will help make further inroads into the spare capacity in the economy. It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target.

Ahead of today's announcement, treasure Josh Frydenberg pressured the big banks and major lenders to pass on the Reserve Bank rate cut in full, in light of the banking royal commission.

To view the full statement of Philip Lowe, Governor of the Reserve Bank, please click here. 

Published : 04 Jun 2019