On Tuesday, 3rd May 2016 just hours before the federal budget was handed down, the Reserve Bank Of Australia cut the official interest rate by 25 basis points to a record low of 1.75 %. The decision was triggered by lower than expected inflation figures, with data showing the consumer price index fell 0.2 percent in the March quarter. Previously, the rate at 2.0% did not change for twelve consecutive months.
The National Australia Bank was quick to pass on the rate cut, announcing it will reduce its variable rate for home loans by 0.25% p.a. NAB Group Executive Personal Banking Gavin Slater said in making the decision to change interest rates, the bank considers a range of factors.
“The circumstances of each decision will always vary and we must take into account factors such as competition, regulatory capital requirements and funding costs,” Mr Slater said.
“Today’s decision balances the needs of our home loan customers with our shareholders.”
The Australian Retailers Association said the rate cut was a welcome move for retailers battling lower consumer confidence.
“The Reserve Bank’s decision to cut rates on the eve of budget is a welcome support to what hopefully will be an economically supportive Budget tonight in the light of recent weak consumer spending and confidence,” Mr Zimmerman said.
“We look forward to this cut filtering through to consumers and business and to tonight’s Budget driving a strong retail economy moving forward.”