Australia’s central bank slashed its benchmark interest rate by half a percentage point yesterday, a larger-than-expected cut that comes amid a slump in the housing market and lackluster growth in the nation’s economy outside the booming mining sector.
The decision by the Reserve Bank of Australia to lower the official cash rate to 3.75 percent follows the release last week of relatively weak inflation data. Economists had widely predicted a cut of only a quarter percentage point. The last interest rate cut was in December last year.
“This decision is based on information received over the past few months that suggests that economic conditions have been somewhat weaker than expected, while inflation has moderated,” Reserve Bank Governor Glenn Stevens said in a statement.
Last week, the Australian Bureau of Statistics released figures showing the annual inflation rate to March was 1.6 percent, down sharply from 3.1 percent a year earlier. The reserve bank’s target inflation rate for the year was 2 to 3 percent.
REASONS
The bank cited the inflation data and a subdued housing market as reasons behind its decision. Stevens also noted slowing growth in the world economy, singling out the more moderate pace of growth in China and continuing tough conditions in Europe.
Sales of new homes fell to their lowest level in more than a decade in March — dropping 9.4 percent from a month earlier, the nation’s Housing Industry Association said in a statement on Monday. Housing prices in the country’s capital cities for the first quarter of this year were down 4.5 percent from the same period a year ago, the statistics bureau reported.
The housing association’s chief economist, Harley Dale, had called for the bank to cut rates by half a percentage point.
“The bank needs to send a clear signal that it is back on the case of assisting an economy that is clearly weaker than it anticipated in 2012,” Dale said.
PRESSURES
Australia’s economy stayed strong throughout the global financial crisis thanks to a mining boom largely fueled by China’s demand for iron ore, coal and natural gas. However, the mining boom has also strengthened the Australian dollar, which is pressuring industries outside the resources sector such as agriculture, tourism and manufacturing.
Australian Treasurer Wayne Swan praised the bank’s decision.
“It’s very welcome, it is well-deserved and it is certainly much needed by households under financial pressure,” Swan told reporters in Canberra.
Michael Blythe, chief economist with Australia’s Commonwealth Bank, said the central bank was likely hoping to provide “a positive shock to consumer and business confidence by doing a bit more than people were expecting.”
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure