The Reserve Bank of Australia in an effort to spur the sluggish Australian financial situation has cut interest rates from 4.75 % to 4.5 %. The cut in interest rates is the first in Australia since April of 2009. Trying to get Australians to spend more especially during the Christmas season is seen as one of the motivating causes for the cut in interest rates in Australia. Another cause is the growing concern of the Reserve Bank of the world’s unsettled stock markets behaviors in recent months. This action by the RBA is a turn around of its previous actions of raising interest rates during world recessive financial conditions.The RBA raised interest rates 7 times during the period between October of 2009 and November of 2010. The recent action by the RBA provoked dissent from world economists and caused the Australian dollar to drop in price. The Australian dollar dropped from $1.054 to $1.0484 in American dollar value right after the report that the RBA had lowered interest rates in Australia. The governor of the Reserve Bank of Australia, Glenn Stevens, explained that the lower Australian interest rates should help the depressing world financial conditions. The governor of the RBA added further that the RBA is planning on cut the interest rates further and that the recent cut is just the beginning of future cuts in interest rates.The governor of the RBA was quoted as saying that the board has been holding off on making a new money policy until it felt that the worries over inflation had been balanced by the recent downturn in world financial matters and that trying to get a renewed growth would be desirable to check any further inflationary worries. The Australian Prime Minister, Julia Gillard, has also issued a statement in support of the Reserve Banks cut in interest rates and has encouraged the country’s banks to pass on the savings to their customers. The cut in interest rates is expected to help mortgage holders in Australia and to see a savings of more than $50 a month on their mortgage payment.In world matters, the cut in Australian interest rates had the effect of causing the New York stock market, to falls by 276 points. While the Dow Jones fell, the stock market in Australia saw a sell off of 1.5 % on the afternoon following the reported cut by the Reserve Bank of Australia in interest rates.
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