Interest rate cut

[Julia]

Good Heavens, the Reserve has dropped the cash rate to 6%!!!

 

[agro]

Good Heavens, the Reserve has dropped the cash rate to 6%!!!

tough times call for tough measures

http://skynews.com.au/business/article.aspx?id=271509

 

[Kimosabi]

Yay, lets fix the problems caused by excessive debt, with.....

More Debt

Hahaha, stupid Debt Slaves....

 

[agro]

I read the Fed in the USA is likely to cut rates too

 

[Temjin]

Hurray for the savers! We get punished for not spending!

 

[Prospector]

I think this makes the savers dollars safer though, and will stop any 'runs'
Wow, no-one got that one right. And the share market bounced from red to green! Mostly.

 

[Buddy]

Hurray for the savers! We get punished for not spending!

I agree.
And what's more, with the decline in value of your dollar (ie inflation) you get punished twice.

It's about time the government lightened up on taxing savings. Hah! In my lifetime, NOT! Wnakers!

 

[fodder-oz]

So lets see how much the banks cut the rates by seeing the Reserve has cut it by a full 1%.. I reckon the banks will only pass on a maximum of .75%

What does everyone think?

Lets hope this brings the markets up from this terrible period.

 

[Awesomandy]

Definitely time to buy gold.

 

[Mofra]

Thank you RBA

 

[nikemi]

So lets see how much the banks cut the rates by seeing the Reserve has cut it by a full 1%.. I reckon the banks will only pass on a maximum of .75%

What does everyone think?

Lets hope this brings the markets up from this terrible period.

I only hope it does not have the same effect as all previous "bail out"s!

Once the euphoria over the cut wears out and people start to realise that to take such drastic measures RBA finally aknowledges the fact that the situation is worse than everyone wants to admit it is. Then we'll be in for yet another bottom!!!

 

[stath]

So lets see how much the banks cut the rates by seeing the Reserve has cut it by a full 1%.. I reckon the banks will only pass on a maximum of .75%

That much?
I think more likely 0.5%, knowing the banks.

 

[cuttlefish]

Definitely time to buy gold.

ironically though we see bank stocks go to the moon instead.

I mean - the RBA feeling the need to slash rates so dramatically, and the banks not being capable of passing it on, isn't ringing the odd alarm bell about how 'safe and comfortable' the aussie banks are feeling right now? Apparently not lookng at their share prices today.

I would also have assumed that if the government really thought the banks were in a strong situation they'd be lambasting them for not passing the cuts on to the public - but instead they appear to be supporting the banks decision.

 

[professor_frink]

Wow that's huge.

Doesn't really sit too well with me though. Between this and the sudden change in attitude from the govt about banks passing on any cuts by the RBA makes me think they might be in quite a bit more trouble than they've let on

 

[chops_a_must]

Hurray for the savers! We get punished for not spending!

Exactly.

Yay, we get rammed up the **** because we aren't stupid enough to leverage everything up and spend everything we earn.

Absolute donkeys.

 

[professor_frink]

ironically though we see bank stocks go to the moon instead.

I mean - the RBA feeling the need to slash rates so dramatically, and the banks not being capable of passing it on, isn't ringing the odd alarm bell about how 'safe and comfortable' the aussie banks are feeling right now? Apparently not lookng at their share prices today.

I would also have assumed that if the government really thought the banks were in a strong situation they'd be lambasting them for not passing the cuts on to the public - but instead they appear to be supporting the banks decision.

beat me to it

What exactly aren't we being told here??

 

[gfresh]

Here is the full policy announcement...

STATEMENT BY GLENN STEVENS, GOVERNOR
MONETARY pOLICY

At its meeting today, the Board decided to lower the cash rate by 100 basis points to 6.0 per cent, effective 8 October 2008.

Conditions in international financial markets took a significant turn for the worse in September. Large-scale financial failures in several major countries were accompanied by serious dislocation in interbank markets and heightened instability in other markets, including sharp falls in share prices. Official actions in a number of countries have been aimed at restoring stability, by adding to short-term liquidity and laying a foundation for longer-term recovery in the health of balance sheets. Nonetheless, financing is likely to be difficult around the world for some time ahead. This is also affecting Australia, albeit by less than in many other countries, given the relative strength of the local banking system.

Economic activity in the major countries is also weakening, and evidence is accumulating of a significant moderation in growth in Australia’s trading partners in Asia. The expansionary effects of the recent surge in Australia’s terms of trade are still coming through, but some decline in the terms of trade now looks likely over the coming year, with many commodity prices having declined from their peaks. This, combined with the likelihood of below-trend growth in the global economy, suggests that global inflation will moderate in 2009.

Thus far, the overall path of economic activity in Australia appears to have been close to what the Board had expected, with the needed moderation in demand occurring. The next CPI is likely to show an increase of around 5 per cent over the four quarters to September, but the Bank remains of the view that inflation will start to decline in 2009.

The recent deterioration in prospects for global growth, together with much more difficult market conditions even for creditworthy borrowers, now present the risk that demand and output could be significantly weaker than earlier expected. Should that occur, inflation would most likely fall faster than earlier forecast.

Given that background, the Board judged that a material change to the balance of risks surrounding the outlook had occurred, requiring a significantly less restrictive stance of monetary policy. The Board also took careful note of movements in funding costs in wholesale markets. Having weighed these considerations, the Board decided that, on this occasion, an unusually large movement in the cash rate was appropriate in order to bring about a significant reduction in costs to borrowers. The Board does not, however, regard that movement as establishing a pattern for future decisions.

The Board will continue to assess prospects for demand and inflation over the period ahead, and set monetary policy as needed to bring inflation back to the 2–3 per cent target over time.

 

[Bushman]

Didn't the Fed slash rates 12-months ago? Look where the Yanks are now! Rate cuts are a one-trick pony I say (as in plenty can still go asundry).

Aussie banks are AA-rated but need to refinance that 30% of foreign debt their business model relies on in the next year or so. Who, who - what are you, an owl (Sorry - favourite quote from 'Heat')?

 

[Kauri]

possibly part of a concerted co-ordinated rate cut initiative by the US, EZ, GB,, etc... interesting... the way the yen carries are coming back points thataway anyways....

Cheers
...........Kauri

 

[pepperoni]

Im a saver and think its great as long as it doesnt draw out the last debt slaves.

Times are inarguably tough and our rates are huge by world standards so why push workers and banks to the wall.

Plus all the debt destruction through defaults should mean some deflationary pressures.


Plus I locked in savings a week or so back at 7.5%