Reserve Bank of Australia’s July meeting minutes hint that interest rates could be cut again

Interest rates in Australia could be cut again even though they are already at a record low of one per cent.

The Reserve Bank of Australia revealed on Tuesday it could still cut the cash rate with the economy growing at the slowest pace since the global financial crisis a decade ago.

Official interest rates are only four cuts away from zero, following consecutive rate cuts in June and July.

Should they fall to this level, Australia would be in an unprecedented situation known as quantitative easing, where the RBA effectively printed cash by buying government bonds in a bid to boost money supply.

Despite that the central bank hinted, in the minutes of its July meeting, it was likely to ease monetary policy again in a bid to get unemployment below 5.2 per cent.

‘The board would continue to monitor developments in the labour market closely and adjust monetary policy if needed to support sustainable growth in the economy and the achievement of the inflation target over time,’ the RBA said on Tuesday.

In another sign of worry China, Australia’s biggest trading partner, is growing at the slowest pace in 27 years.

In the second par of its minutes, the RBA noted China’s economic activity had slowed since the March quarter. 

The central bank was also downbeat about the Australian economy, with gross domestic product growth in the year to March the slowest since the GFC in 2009.

The Reserve Bank of Australia revealed on Tuesday it could still cut the cash rate with the economy growing at the slowest pace since the global financial crisis a decade ago (pictured is the RBA’ headquarters in Sydney)

It noted in its July meeting minutes that private demand had contracted for the third consecutive quarter ‘because there had been further falls in mining investment and housing construction’. 

The central bank board also noted how consumption growth had remained subdued and explained this formed the case for a July interest rate cut.

‘In light of this, the recent run of data and the lower level of interest rates resulting from the decision taken at the previous meeting, the case for a further reduction in the cash rate was considered,’ it said.

‘Lower interest rates would provide more Australians with jobs and assist with achieving more assured progress towards the inflation target.’

Most of the banks didn’t get the economic memo, with ANZ the only major lender this month to pass on in full the RBA’s 25 basis point rate cut.

The Commonwealth Bank and NAB cut their standard variable mortgage rates by a lesser 19 basis points while Westpac reduced its equivalent rate by 20 basis points.

Despite that, Australian mortgage rates are at the lowest level since the 1950s.