Today thy Reserve Bank of Australia cut the cash rate by 25 basis point to 0.5% in attempt to soften the blow of a rapidly spreading coronavirus. THE RBA governor Philip Lowe said today’s cut “comes ahead of a worse than expected hit from the virus outbreak in the near term”.

Dr Lowe said his previous forecast of a “gentle turning point” in the Australian economy was now under a cloud.

“Prior to the outbreak, there were signs that the slowdown in the global economy that started in 2018 was coming to an end,” Dr Lowe said in his recent address. “It is too early to tell how persistent the effects of the coronavirus will be and at what point the global economy will return to an improving path.”

Dr Lowe also said that the board remains prepared to ease monetary policy further.

With inflation remaining well below target, underemployment rising and stagnant wages growth, today’s decision was not a surprise. And at the time of writing, all of the big four banks (ANZ, CBA, NAB & Westpac) have passed on the full interest rate cut.

Rick Maggi