RBA chief hints at more rate cuts
The governor of Australia's Reserve Bank has hinted at more cuts to interest rates as the country's economic growth slows, hit hard by a lack of domestic household spending.
Speaking to the Armidale Business Chamber overnight, Philip Lowe said while the Australian economy had reached a "gentle turning point", he expected interest rates to remain low for some time.
The official cash rate is currently at a historic low of 1.0 percent, with many believing the RBA will slash that rate again when board members meet next week.
"It is nevertheless likely that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieving more assured progress towards the inflation target," Governor Lowe told the chamber.
"The Board is prepared to ease monetary policy further if needed to support sustainable growth in the economy, make further progress towards full employment, and achieve the inflation target over time."
Governor Lowe touched heavily on the plight of the Australian farmers, noting that a weak agricultural sector was weighing heavily on the household incomes of rural families.
"Farm output in Australia has fallen for the past two years and there has been a sharp drop in farm income as farmers have had to cope with the increased costs for obtaining feed and water," said Governor Lowe.
"These difficult conditions have contributed to the weakness in overall household incomes and consumption, and the effects are particularly felt in regional communities. The drought has also put upward pressure on food prices over the past year, particularly for bread, milk and meat.
"We are all hoping that the drought breaks soon."
Australia's historically low interest rate is fast becoming amongst the lowest in the world, sharing the official cash rate of 1 percent with Albania and New Zealand.
Even lower is the United Kingdom – with an official cash rate of 0.75 percent – who is then bested by Israel, who carries a miniscule interest rate of 0.25 percent.
Australia still has some way to go until we reach negative interest rates, joining the likes of Japan, Sweden, Switzerland and Denmark, who all carry interest rates below 0.00 percent.
In these countries, the central bank (and as a result, private banks) charges negative interest, which means that account holders have to pay the bank to keep their money secure instead of earning interest on long-held accounts.
The RBA is set to meet at 2pm on October 2, after which an announcement of interest rate changes will be made.