As expected the Reserve Bank cut official interest rates to a new record low of 1.25% on Tuesday (down 0.25%) in an attempt to stimulate a sluggish economy.
The cut was the first since 2016 when the bank cut rates twice in May and August.
“Today’s decision to lower the cash rate will help make further inroads into the spare capacity in the economy,” Governor Philip Lowe said in a post-meeting statement.
“It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target.
“The strong employment growth over the past year or so has led to a pick-up in wages growth in the private sector, although overall wages growth remains low.
“A further gradual lift in wages growth is expected and this would be a welcome development. Taken together, these labour market outcomes suggest that the Australian economy can sustain a lower rate of unemployment.
“The recent inflation outcomes have been lower than expected and suggest subdued inflationary pressures across much of the economy. Inflation is still however anticipated to pick up, and will be boosted in the June quarter by increases in petrol prices,“ Dr. Lowe said in the statement.
“The Board will continue to monitor developments in the labour market closely and adjust monetary policy to support sustainable growth in the economy and the achievement of the inflation target over time,” the statement concluded, maintaining the focus on the jobs market by the central bank.