ISM Associates: Australia Cuts Rates To Record Low

ISM Associates: Weak inflation and economic growth leads RBA to cut benchmark rate to 1.5%.
ISM Associates: The Reserve Bank of Australia (RBA) has trimmed its benchmark interest rate to an historic low of 1.5% amid slowing economic growth and weak inflation.
The move was largely expected by the market and the central bank's board believes the move will foster an improvement in an economy still trying to reduce its dependence on commodities after the unprecedented mining boom of the last decade which largely insulated the country from the worst effects of the global financial crisis of 2008.
The RBA is the latest in a long line of central banks battling disinflationary pressures caused by weak consumption and a decline in business investment. Europe's ECB, Britain's Bank of England, the US Federal Reserve and the Bank of Japan are facing similar challenges as the overhang of debt - both government and household - and downside risks to the global economy continue to hamper growth in advanced economies.
James Preston, Chief Economist at ISM Associates said, "Australia faces its own economic challenges including a relatively strong currency which is weighing on its exports and attracting inward flows of capital from investors looking to take advantage of its sovereign bonds which are among only a handful of advanced economies' bonds that are still generating a positive yield."
It is hoped that the rate cut would help to provide support for a labor market that features unusually high levels of part-time work and underemployment.
ISM Associates believes the cut to 1.5% will be insufficient to boost the economy and says it expects the RBA to cut rates again in 2017 if not by the end of 2016.