Australia clips rates to skirt recession

Australia clips rates to skirt recessionSydney  - The Reserve Bank of Australia on Tuesday cut interest rates by 1 per cent to 3.25 per cent in hopes of lifting consumer confidence and helping the economy skirt the global recession.

It was the RBA's fifth monthly cut and brings the rate it charges banks for borrowing to a level not seen since the 1960s.

The further easing of monetary policy comes after figures were released showing inflation falling sharply towards the RBA's 3-per-cent upper-range target.

It also came the same day the government announced a revision of fiscal policy. A financial stimulus package worth 42 billion Australian dollars (27 billion US dollars) will send the current account on the balance of payments from a healthy surplus to a deep deficit.

The central bank, which now assesses recession as the threat rather than inflation, has now cut the cash rate by 3.75 per cent in five consecutive months.

High Street banks and finance houses are unlikely to pass on the full rate cut because their costs of borrowing have risen in line with the international credit crunch.

The government has urged the banks to pass on to hard-pressed mortgage holders the full 100 basis points, arguing that their cost of funds have fallen since it guaranteed their overseas borrowings. (dpa)

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