Australia cuts rates to record low of 2.5% as mining boom ends
The Reserve Bank of Australia (RBA) lowered interest rates to an all-time low of 2.5% Tuesday amid concerns about the end of the mining boom and an investment drop.
The dramatic rate cut is the eighth such a measure taken by the central bank since Nov. 2011, when it first acknowledged a growth slowdown as the country's decade-long mining boom began to fade. However, it’s the lowest since Australia’s central bank was established in 1959.
Australia’s economy has been under increasing pressure over the past year, as slowing growth in China has led to waning demand and a slump in prices of key commodities.
The situation has led to declining investment and several large-scale resources projects have had to be shelved or abandoned. By the end of July, jobs cuts in the coal sector alone hit 11,000.
Central bank’s governor, Glenn Stevens, said in a statement that growth was below the long-term trend level of 3 percent as the economy adjusts to lower levels of mining investment, but there was a “reasonable prospect” of it picking up in 2014.
Australia’s government downgraded its economic growth forecast last week for the current fiscal year from 2.75% to 2.5%, increasing its unemployment forecast for the year from 5.75% to 6.25%.