RBA cuts interest rates

Yesterday’s interest rate cut has been welcomed by manufacturers.

Interest rates were lowered by the Reserve Bank of Australia by 25 basis points to 3.25, with further cuts being tipped. Another decrease would see rates at their lowest level since the thick of the global financial crisis.

The CFMEU had urged the cuts after Monday’s weak Australian Industry Group – PricewaterhouseCoopers Australian Performance of Manufacturing Index result of 44.1 (any result under 50 in the survey indicates a contraction).

“For too many months now they have sat on their hands whilst jobs were lost and industries suffered,” CFMEU secretary Michael O'Connor said earlier in the week.

Yesterday the union claimed that the cut didn’t go far enough.

“While 25 basis points is a good start, today's decision should have been a 50-basis-point cut,” said O’Connor in a statement reported by AAP.

“Manufacturing employs one million Australians and yet the RBA seems content to let an entire industry get eaten by the high dollar.”

The Ai Group said the cut would offer some relief to industry.

“It reflects the RBA’s acknowledgement of a softening of the Australian economy in recent months, and especially the ongoing softness in labour demand,” said CEO Innes Willox, adding that financial institutions can and should pass the cuts on in full.

“This rate cut will hopefully give a shot in the arm to key employing industries across the economy, including manufacturing, construction and services.”