Australia lowers key interest rate to 4.5 percent

AP News
Posted: Nov 01, 2011 6:44 AM
Australia lowers key interest rate to 4.5 percent

Australia's central bank cut its benchmark interest rate by a quarter percentage point Tuesday in a bid to bolster the nation's economy amid uncertainty stemming from Europe's debt crisis.

The Reserve Bank of Australia's decision to lower the rate to 4.5 percent was largely expected by economists, and was the first time the bank had lowered its key interest rate since April 2009.

The bank cited the significant slowdown in European economic growth, a slight rise in Australia's unemployment rate _ currently at 5.2 percent _ and subdued confidence outside the country's lucrative mining sector as factors behind its decision.

It said monetary policy had been "mildly restrictive" for the Australian economy over the past year and it was now appropriate to shift to a "more neutral" stance.

Financial markets had become more stable recently "but it is likely to be some time yet before concerns about the European situation can definitively be laid to rest," Reserve Bank Governor Glenn Stevens said in a statement.

Australia's economy weathered the 2008 financial crisis and subsequent global recession better than most developed nations, thanks in large part to strong Chinese demand for its iron ore and other minerals.

But the bank warned that Europe's sovereign debt crisis may continue to affect Australian businesses and households, despite a plan hammered out by European leaders last week.

Prime Minister Julia Gillard said the bank's decision will bring needed relief for Australian families.

"Despite our strong economic fundamentals _ and they are strong _ parts of the community are doing it very tough, are finding it very hard to make the family accounts add up, to get the bills paid," Gillard told Parliament.