RBA cuts cash rate to 4.25 per cent

It is the second cut in a row and rates are now at their lowest level since April last year.

One reason given for the move was the ongoing crisis in Europe which the Board felt was now impacting on Asia.

The Board was also concerned about growth in China and its impact on the Australian resources sector.

The news will be welcome relief for homeowners and retailers.

A 25 point reduction will save the average household $50 a month on a $300,000 mortgage. And the November and December cuts combined will amount to a $100 saving.

AT ITS meeting today, the Board of the Reserve Bank of Australia decided to lower the cash rate to 4.25 per cent, effective 7 December 2011.

Retailers will also be happy. They have had a campaign leading up to Christmas warning that lay offs were likely if there wasn't further easing from the Board.

And those market watchers sensitive to the Eurozone will also see the reduction as prudent - with Europe on the brink of a decisive week.

However other analysts - and the big four banks - would have preferred the RBA to leave the rate at 4.50%.

They have argued that a 25 basis point cut would be insignificant in the event of a Euro crash, and that the cut would be wasted if in fact the various European leaders managed to stablise their economies in the next few days.

Treasurer Wayne Swan said the decision would provide welcome Christmas cheer for families and small and large businesses. 



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