THE Reserve Bank of Australia has lowered the cash rate by 25 basis points to 4.5 per cent, coming into effect tomorrow.
Governor of monetary policy decision Glenn Stevens said: “Recent information is consistent with a moderation in the pace of global growth, though fears of a major downturn have not been borne out so far.
“The pace of US economic expansion picked up in the September quarter, but is still only moderate and leaves considerable spare capacity.
“China’s growth has slowed, as policymakers there had intended. Output in Asia has now recovered from the effects of the Japanese earthquake, and domestic demand in the region is generally expanding.
“Trade performance, however, is starting to see some effects of a significant slowing in economic activity in Europe, where the prospects are for economic weakness to continue.
“Commodity prices, while still at high levels, have generally declined over recent months.
“Financial markets have recovered somewhat from the turmoil of recent months, helped by stronger economic data in the United States and by signs that European governments are making progress in their efforts to deal with the sovereign debt and banking problems.
“Equity markets have gained ground and the Australian dollar has risen significantly as risk aversion has lessened.
“But it is likely to be some time yet before concerns about the European situation can definitively be laid to rest and the effects of the recent turmoil on confidence may result in a period of precautionary behaviour by firms and households.
“Information about the Australian economy suggests moderate growth overall.”