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Australia slashes interest rates

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Date: Tuesday 07 Oct 2008

LONDON (ShareCast) - Australia helped to spark a late rally among Asian stocks yeaterday after its central bank cut overnight interest rates to 6% from 7%.

The 100 basis point cut in the cash rate target was the largest single reduction since 1992. Reserve Bank governor Glenn Stevens said the unusually big cut in the cost of borrowing was necessary to prevent further economic slowdown.

“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 forecast,” Stevens said.

"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," he added.

A month ago the Reserve Bank cut the rate by 25 basis points, or 0.25 percentage points, it first reduction for six years.

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