SYDNEY, Oct. 2 (Xinhua) -- Reserve Bank of Australia (RBA) cut interest rates by 0.25 percentage point to 3.25 percent on Tuesday, reflecting concerns about weaker global conditions, particularly slower growth in China.
The move surprised most local economists with Paul Bloxham, HSBC's Chief Economist, Australia & New Zealand, saying the move came earlier than expected.
"The rate cut came early. The RBA cut the cash rate by 25 basis points today, consistent with market pricing and a little ahead of when most economists expected it. The cut reflected concerns about weaker global conditions, particularly in China." he said.
The official interest rate is now 3.25 percent. Rates were last this low in October 2009. And the 25 basis point fall is the fifth rate cut the Reserve Bank has made since November last year.
Australia's Opposition Treasurer Joe Hockey welcomed the cut in the cash rate. "The Board of the Reserve Bank has made it clear that life is getting tougher and not easier for Australian families and businesses," he told journalists.
"As I have been warning for some time, Australia can no longer rely on record high commodity prices to boost economic growth and the Budget bottom line."he said.
Hockey said the RBA is no longer confident about the outlook for growth, suggesting the labor market has generally softened somewhat in recent months and "the growth outlook for next year looked a little weaker".
Australian cash rate have now fallen by 1.5 percentage point since the current cycle of easing began.
The rate cut came after recent revelation that the domestic economy is slowing amidst renewed fears for the health of the global economy.
The Reserve Bank faced a mixed bag of data when it met Tuesday including cooled commodity prices and state and federal budget cuts on the horizon.
"Many economists had been predicting one or two rate cuts by the end of the year," said property expert Carolyn Boyd.
When the Reserve Bank next meets it will have the benefit of the September quarter inflation data, which is due out on October 24.
Meanwhile, Australian retailers welcomed the central bank's decision to cut the cash rate by 25 basis points to 3.25 percent.
Australian National Retailers Association (ANRA) Chief Executive Officer Margy Osmond said the decision by the Reserve Bank of Australia would assist retailers to increase sales during the Christmas period as it gives consumers enough time to digest the change in preparation for a good Christmas shopping.
"Stimulus like this cut is exactly what we need leading up to Christmas," Osmond said.
National Retail Association (NRA) Executive Director Trevor Evans said the RBA's decision would provide many struggling retailers some much-needed breathing room.
"The Christmas and New Year sales will be critical for retailers, as traditionally up to 25 percent of their yearly earnings is made around this time," he said.
"Hopefully today's cut will lead to a more prosperous Christmas all around."