-Glenn Stevens, RBA Governor
The Reserve Bank of Australia has joined easing trend spreading around the world's leading central banks. The RBA announced a 25 basis point interest rate cut, bringing the official cash rate down from 2.50% to 2.25%, referring to soft inflation and weak economic growth as the key drivers behind the decision. That was the first time in 17 months that the RBA has altered the rates. By cutting rates the central bank hopes to boost business activity and household spending in light of slowing growth, low commodity prices and weak investment. One of the main issues around the world impacting monetary policy has been the sharp plunge in oil prices, which has put downward pressure on consumer prices around the globe. Australia's inflation rose 1.7% on year in the December quarter, sliding below the RBA's 2-3% target corridor for the first time in more than two years. Meanwhile, a separate report showed Australian building consents fell slightly in December but kept a solid growth over the year, supported by low interest rates and rapid house-price inflation. Building approvals fell 3.3% in December and beating economists' expectations for a 5.0% decline. On an annual basis, approvals rose 8.8% in the reported month. Additionally, Australia's trade gap narrowed in December as exports gained, while imports fell. Trade deficit shrank to $436 million from a revised $1.02 billion in November, as exports added 1%, spurred by non-monetary gold exports. Imports, however, declined 1% over the month.
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