Reserve Bank cuts rates by 25 basis points to 3.85%

Australian Community Media

The Reserve Bank of Australia (RBA) has handed down its second interest rate cut of the year in more good news for Aussie homeowners. Watch RBA Governor Michele Bullock make the announcement.

Transcript

00:00So price increases have slowed and it's fairly broadly based and this is very good news.

00:07The Board's strategy over quite some time has been to bring inflation down while avoiding

00:12a sharp rise in unemployment.

00:14This is consistent with our dual mandate of price stability and full employment.

00:20I know this period of relatively high interest rates has been and continues to be challenging

00:25for many households and businesses but it was essential we brought inflation down because

00:30inflation hurts everyone.

00:33The strategy that we took to achieve this was different to that of some other central

00:37banks who took rates much higher than we did.

00:41The Board accepted the trade off that leaving the cash rate where it was would bring inflation

00:45down more gradually but without a big increase in unemployment.

00:49A sharp rise in unemployment would have been very costly for families and for the Australian

00:54economy.

00:56Anyone who has experienced unemployment knows the profound impact that it has on your

01:00life and those that depend on you.

01:02So the cautious approach we have taken has got us to this point where inflation is now

01:08below 3% and employment is holding up.

01:13But now we've got inflation down we must keep it there while trying to maintain a healthy jobs

01:18market.

01:20So there's now a new set of challenges facing the economy but with inflation declining and

01:26the unemployment rate relatively low we're well positioned to deal with them.

01:30The Board remains prepared to take further action if that is required.

01:35Now since our last meeting global economic and policy uncertainty has increased substantially

01:41following tariff announcements by the US administration, the response of its trading partners and subsequent

01:47changes to the policies including various bilateral agreements and deals.

01:52It's been a complete roller coaster I'd have to say.

01:56How the tariffs will affect the global economy are going to depend on a few things.

02:01Where tariffs will settle following negotiations between the United States and its major trading

02:06partners.

02:07How the other trading partners respond.

02:10The extent to which global supply chains are disrupted by the increased barriers to trade.

02:15The degree to which trade can be diverted.

02:18And the impact of uncertainty on business investment and household spending.

02:22One thing to keep in mind we have made the judgement that global trade developments will overall

02:27be disinflationary for Australia.

02:30However there is a risk to inflation on the other side.

02:33The trade policies could lead to supply chain issues which could raise prices for some imports

02:39much as we saw during the pandemic.

02:41And so we'll also need to be alert to such upside risks.

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