Editorial Ball In Banks' Court After Shock Rate Cut
Illawarra Mercury
Wednesday October 8, 2008
THE Reserve Bank of Australia's decision yesterday to cut its cash rate by a full percentage point stunned even the most experienced economists.
Widely tipped to announce a half percentage point fall, the Reserve Bank (RBA) took the country by surprise in its bold move to please homebuyers while still protecting Australian banks from the credit crunch gripping the world.The decision has managed to satisfy the vast majority of all players - homebuyers, business groups, the property market, economists and politicians - while the Australian share market, which had taken a pounding this week, reacted with a strong rally.Even more encouraging was movement by some banks late yesterday to pass on at least some of the rate cut to struggling homeowners and businesses.The RBA described the rate cut as "unusually large", but in doing so has enabled the banks to pass on a solid rate cut to customers, while retaining part of the cut to enable them to remain strong in the face of the worldwide downturn.It was an aggressive move by the RBA and overseas central banks may well follow suit in days ahead.It just remains to be seen now how generous the banks are feeling and how quickly they will pass on the good news to borrowers.
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