Homeowners get Christmas bonus

2 Dec 2008, 1:48 pm   -   Source: SBS staff and agencies
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The Reserve Bank of Australia has cut interest rates by a full 100 basis points, bringing the cash rate to 4.25 per cent.

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The Reserve Bank of Australia (RBA) has cut interest rates by 100 basis points, bringing the cash rate to 4.25 per cent.

The move follows severe global economic downturn and a slowing Australian economy.

Shortly after the rate decision, Federal Treasurer Wayne Swan announced in parliament that the Commonwealth Bank would pass on the full 1 per cent rate cut.

 The bigger than expected cut by the RBA is now the lowest in more than six years.


Last month the RBA made a similar move, cutting interest rates by 75 basis points.

Coalition MPs have called on the big banks to pass on today's entire cut to home owners.

Opposition frontbencher Christopher Pyne urged the banks to show some pre-Christmas spirit.

"Banks should pass on the full rate cut, whatever it is, to consumers," he told reporters.

Earlier, an investment specialist called on the RBA to cut rates by up to two per centage points, to avoid an economic train wreck.

The boss of FIIG Securities Jim Stening says the risk of overstimulating the economy pales in comparison to what would happen if the RBA cuts rates too slowly, as our major trading partners go into recession.

Meanwhile lower interest rates and falling petrol prices have lured consumers back to the shops, spending $18.4 billion in October.

Retail spending rose by a seasonally-adjusted 0.7 per cent in October compared with the previous month, Australian Bureau of Statistics (ABS) data released on Tuesday shows.
   
Tuesday's data takes into account the 125 basis points worth of cuts by the RBA in September and October.

The central bank cut the rate by a further 75 basis points in November.

There was also brighter news on Australia's international trade position with the current account deficit narrowing to $9.74 billion in the September quarter, from $14.04 billion in the
previous quarter.

The data feeds into the September quarter gross domestic product which is due for release on Wednesday.

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