Australia’s central bank cut its benchmark interest rate by one-quarter of a percentage point to a record-low 2.5 percent yesterday because of slower growth and weakening commodity prices.
The Reserve Bank of Australia’s decision was made at a monthly board meeting in the first week of a federal election campaign and was expected by most economists.
The bank last cut the Official Cash Rate, which is a benchmark for commercial lending rates, by one-quarter of a point in May, following four cuts last year.
Photo: Reuters
In a statement, Reserve Bank of Australia Governor Glenn Stevens said economic growth was below the long-term trend level of 3 percent, as the economy adjusts to lower levels of mining investment, but added that there was a “reasonable prospect” of it picking up next year.
Australia has enjoyed a decade-long boom in mining and related construction that helped it avoid recession during the global financial crisis. However, growth is now slowing as China’s economy cools and drags down prices for commodities such as iron ore and coal.
The Australian government last week nearly doubled its budget deficit forecast for the fiscal year through June next year to A$30.1 billion (US$26.8 billion), as slowing growth weighs on tax revenues.
Stevens said the Aussie dollar was still quite high despite falling by 15 percent since April. The Australian currency was little changed at just below US$0.90 immediately after the rate announcement.
“It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy,” he said.
Canberra last week downgraded its growth forecast for the current fiscal year beginning on July 1 from 2.75 percent to 2.5 percent.
The 2.5 percent policy rate is the lowest since the central bank’s inception in 1960.
SPECULATION: The central bank cut the loan-to-value ratio for mortgages on second homes by 10 percent and denied grace periods to prevent a real-estate bubble The central bank’s board members in September agreed to tighten lending terms to induce a soft landing in the housing market, although some raised doubts that they would achieve the intended effect, the meeting’s minutes released yesterday showed. The central bank on Sept. 18 introduced harsher loan restrictions for mortgages across Taiwan in the hope of curbing housing speculation and hoarding that could create a bubble and threaten the financial system’s stability. Toward the aim, it cut the loan-to-value ratio by 10 percent for second and subsequent home mortgages and denied grace periods for first mortgages if applicants already owned other residential
EXPORT CONTROLS: US lawmakers have grown more concerned that the US Department of Commerce might not be aggressively enforcing its chip restrictions The US on Friday said it imposed a US$500,000 penalty on New York-based GlobalFoundries Inc, the world’s third-largest contract chipmaker, for shipping chips without authorization to an affiliate of blacklisted Chinese chipmaker Semiconductor Manufacturing International Corp (SMIC, 中芯). The US Department of Commerce in a statement said GlobalFoundries sent 74 shipments worth US$17.1 million to SJ Semiconductor Corp (盛合晶微半導體), an affiliate of SMIC, without seeking a license. Both SMIC and SJ Semiconductor were added to the department’s trade restriction Entity List in 2020 over SMIC’s alleged ties to the Chinese military-industrial complex. SMIC has denied wrongdoing. Exports to firms on the list
ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip assembly and testing manufacturing (ATM) service provider, expects to double its leading-edge advanced technology services revenue next year to more than US$1 billion, benefiting from strong demand for artificial intelligence (AI) chips, a company executive said on Thursday. That would be the second year that ASE has doubled its advanced chip packaging and testing technology revenue, following an estimate of more than US$500 million for this year. ASE is one of the major beneficiaries from the AI boom as Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is outsourcing production of advanced chip
TECHNOLOGY EXIT: The selling of Apple stock might be related to the death of Berkshire vice chairman Charlie Munger last year, an analyst said Billionaire Warren Buffett is now sitting on more than US$325 billion in cash after continuing to unload billions of US dollars worth of Apple Inc and Bank of America Corp shares this year and continuing to collect a steady stream of profits from all of Berkshire Hathaway Inc’s assorted businesses without finding any major acquisitions. Berkshire on Saturday said it sold off about 100 million more Apple shares in the third quarter after halving its massive investment in the iPhone maker the previous quarter. The remaining stake of about 300 million shares was valued at US$69.9 billion at the end of
RSS