The Reserve Bank of Australia (RBA) has cut the cash rate by 25 basis points to 2%.
The central bank said in its statement that Australia’s terms of trade are falling as the global economy moderately expands alongside declining commodity prices.
“The Federal Reserve is expected to start increasing its policy rate later this year, but some other major central banks are stepping up the pace of unconventional policy measures. Hence, financial conditions remain very accommodative globally, with long-term borrowing rates for sovereigns and creditworthy private borrowers remarkably low,” the official statement reads.
RBA noted Australia is seeing signs of improvement in its household demand over the past six months and even stronger growth in employment.
“At today's meeting, the Board judged that the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand,” the bank added.
They also acknowledged that Sydney property prices are rising sharply despite the varied trends in other cities.
The RBA assured that they are working closely with regulators to assess and control the risks in the housing market.
“Low interest rates are acting to support borrowing and spending, and credit is recording moderate growth overall, with stronger lending to businesses of late. Growth in lending to the housing market has been steady over recent months,” the bank said.