Pass on the rate cuts to Businesses - RBA

The Reserve bank of Australia is pushing the major banks to pass through future interest rates for all businesses to revive activities after a hard recession. The decision has surprised the public and business activists. The decision to reduce interest rates by 25 basis points to 3per cent, the lowest rate in 49 years, met the expectations of the financial markets even though economists were divided on the likely outcome of the April meeting.

The Reserve bank of Australia is now expected to cut rates further by 50 points by the end of this year which will be recorded the lowest in the past 53 years. The Commonwealth Bank was the only major bank to announce a move on home loan rates yesterday, reducing its standard variable rate by 10 basis points. Its rival, the National Australia Bank, blamed high funding costs, even though there has been a marked reduction from the peak, for its decision to keep rates on hold. Ahead of this decision, official interest rates had been cut by 400 basis points since September. But according to RBA figures, only two-thirds of the reductions had been applied to business lending.

These kinds of rate cuts definitely boost the traders and business people in flowing to Australia. Hopefully other countries follow these rate cuts.